Is Marfrig Global Foods S.A. (BVMF:MRFG3) Potentially Undervalued?

Marfrig Global Foods S.A. (BVMF:MRFG3), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the BOVESPA. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on Marfrig Global Foods’s outlook and valuation to see if the opportunity still exists.

Check out the opportunities and risks within the BR Food industry.

What's The Opportunity In Marfrig Global Foods?

Good news, investors! Marfrig Global Foods is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Marfrig Global Foods’s ratio of 1.14x is below its peer average of 7.67x, which indicates the stock is trading at a lower price compared to the Food industry. Marfrig Global Foods’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Can we expect growth from Marfrig Global Foods?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Marfrig Global Foods, at least in the near future.

What This Means For You

Are you a shareholder? Although MRFG3 is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to MRFG3, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on MRFG3 for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Be aware that Marfrig Global Foods is showing 4 warning signs in our investment analysis and 2 of those make us uncomfortable...

If you are no longer interested in Marfrig Global Foods, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.