At R$8.17, Is Dexxos Participações S.A. (BVMF:DEXP3) Worth Looking At Closely?

Dexxos Participações S.A. (BVMF:DEXP3), might not be a large cap stock, but it saw a decent share price growth in the teens level on the BOVESPA over the last few months. Less-covered, small caps sees 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 take a look at Dexxos Participações’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Dexxos Participações

What is Dexxos Participações worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio 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 Dexxos Participações’s ratio of 3.65x is trading slightly below its industry peers’ ratio of 4x, which means if you buy Dexxos Participações today, you’d be paying a reasonable price for it. And if you believe Dexxos Participações should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Dexxos Participações’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Dexxos Participações?

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 Dexxos Participações, 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? DEXP3 seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on DEXP3, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on DEXP3 for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on DEXP3 should the price fluctuate below the industry PE ratio.

If you want to dive deeper into Dexxos Participações, you'd also look into what risks it is currently facing. To that end, you should learn about the 4 warning signs we've spotted with Dexxos Participações (including 2 which are a bit unpleasant).

If you are no longer interested in Dexxos Participações, 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.