Why Centro de Imagem Diagnósticos S.A. (BVMF:AALR3) Could Be Worth Watching

Centro de Imagem Diagnósticos S.A. (BVMF:AALR3), is not the largest company out there, but it led the BOVESPA gainers with a relatively large price hike in the past couple of weeks. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Centro de Imagem Diagnósticos’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Centro de Imagem Diagnósticos

What's the opportunity in Centro de Imagem Diagnósticos?

Great news for investors – Centro de Imagem Diagnósticos is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is R$15.28, but it is currently trading at R$11.12 on the share market, meaning that there is still an opportunity to buy now. However, given that Centro de Imagem Diagnósticos’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 Centro de Imagem Diagnósticos look like?

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. Centro de Imagem Diagnósticos' revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since AALR3 is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on AALR3 for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy AALR3. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

So while earnings quality is important, it's equally important to consider the risks facing Centro de Imagem Diagnósticos at this point in time. In terms of investment risks, we've identified 2 warning signs with Centro de Imagem Diagnósticos, and understanding them should be part of your investment process.

If you are no longer interested in Centro de Imagem Diagnósticos, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

If you’re looking to trade a wide range of investments, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.