What Is Natura &Co Holding S.A.'s (BVMF:NTCO3) Share Price Doing?

By
Simply Wall St
Published
January 20, 2022
BOVESPA:NTCO3
Source: Shutterstock

While Natura &Co Holding S.A. (BVMF:NTCO3) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the BOVESPA over the last few months, increasing to R$45.08 at one point, and dropping to the lows of R$20.24. 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 Natura &Co Holding's current trading price of R$20.87 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Natura &Co Holding’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Natura &Co Holding

What's the opportunity in Natura &Co Holding?

Natura &Co Holding is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison 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 Natura &Co Holding’s ratio of 45.65x is above its peer average of 23.3x, which suggests the stock is trading at a higher price compared to the Personal Products industry. But, is there another opportunity to buy low in the future? Given that Natura &Co Holding’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.

Can we expect growth from Natura &Co Holding?

earnings-and-revenue-growth
BOVESPA:NTCO3 Earnings and Revenue Growth January 20th 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Natura &Co Holding's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in NTCO3’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe NTCO3 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on NTCO3 for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for NTCO3, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Natura &Co Holding as a business, it's important to be aware of any risks it's facing. For example - Natura &Co Holding has 2 warning signs we think you should be aware of.

If you are no longer interested in Natura &Co Holding, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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