At R$28.87, Is It Time To Put São Martinho S.A. (BVMF:SMTO3) On Your Watch List?

While São Martinho S.A. (BVMF:SMTO3) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the BOVESPA. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine São Martinho’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

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

What Is São Martinho Worth?

Good news, investors! São Martinho is still a bargain right now. According to my valuation, the intrinsic value for the stock is R$40.49, but it is currently trading at R$28.87 on the share market, meaning that there is still an opportunity to buy now. However, given that São Martinho’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of São Martinho look like?

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. However, with a negative profit growth of -4.7% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for São Martinho. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although SMTO3 is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to SMTO3, 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 SMTO3 for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you'd like to know more about São Martinho as a business, it's important to be aware of any risks it's facing. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of São Martinho.

If you are no longer interested in São Martinho, 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.