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

While Marfrig Global Foods S.A. (BVMF:MRFG3) might not have the largest market cap around , it received a lot of attention from a substantial price increase on the BOVESPA over the last few months. The company's trading levels have reached its high for the past year, following the recent bounce in the share price. With many analysts covering the mid-cap 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? Let’s take a look at Marfrig Global Foods’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Marfrig Global Foods

Is Marfrig Global Foods Still Cheap?

Great news for investors – Marfrig Global Foods is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that Marfrig Global Foods’s ratio of 2.62x is below its peer average of 8.88x, which indicates the stock is trading at a lower price compared to the Food industry. What’s more interesting is that, Marfrig Global Foods’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Marfrig Global Foods, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

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. Consider 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, we 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 while earnings quality is important, it's equally important to consider the risks facing Marfrig Global Foods at this point in time. Every company has risks, and we've spotted 3 warning signs for Marfrig Global Foods (of which 2 are significant!) you should know about.

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.