What Is Ambev S.A.'s (BVMF:ABEV3) Share Price Doing?

Ambev S.A. (BVMF:ABEV3) saw a double-digit share price rise of over 10% in the past couple of months on the BOVESPA. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Ambev’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Ambev

What is Ambev worth?

According to my valuation model, Ambev seems to be fairly priced at around 11.39% above my intrinsic value, which means if you buy Ambev today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is R$15.52, then there isn’t really any room for the share price grow beyond what it’s currently trading. What's more, Ambev’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What kind of growth will Ambev generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by a double-digit 15% over the next couple of years, the outlook is positive for Ambev. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has already priced in ABEV3’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on ABEV3, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 2 warning signs for Ambev you should be aware of.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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