When Should You Buy São Martinho S.A. (BVMF:SMTO3)?

While São Martinho S.A. (BVMF:SMTO3) might not have the largest market cap around , it saw significant share price movement during recent months on the BOVESPA, rising to highs of R$27.08 and falling to the lows of R$21.48. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether São Martinho's current trading price of R$21.48 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at São Martinho’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for São Martinho

Is São Martinho Still Cheap?

Good news, investors! São Martinho is still a bargain right now. According to our valuation, the intrinsic value for the stock is R$30.70, but it is currently trading at R$21.48 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, São Martinho’s share price is theoretically quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, 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 São Martinho?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 São Martinho, it is expected to deliver a negative earnings growth of -7.8%, 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 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 an eye on SMTO3 for a while, but hesitant on making the leap, we recommend you research further 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. You'd be interested to know, that we found 2 warning signs for São Martinho and you'll want to know about these.

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.