Is There Now An Opportunity In Dexco S.A. (BVMF:DXCO3)?

Dexco S.A. (BVMF:DXCO3), is not the largest company out there, but it saw significant share price movement during recent months on the BOVESPA, rising to highs of R$14.92 and falling to the lows of R$10.75. 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 Dexco's current trading price of R$10.89 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 Dexco’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Dexco

Is Dexco still cheap?

Dexco appears to be overvalued by 37% at the moment, based on my discounted cash flow valuation. The stock is currently priced at R$10.89 on the market compared to my intrinsic value of R$7.95. This means that the opportunity to buy Dexco at a good price has disappeared! Another thing to keep in mind is that Dexco’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What kind of growth will Dexco generate?

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Dexco, at least in the near future.

What this means for you:

Are you a shareholder? If you believe DXCO3 is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. 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 DXCO3 for a while, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?

If you want to dive deeper into Dexco, you'd also look into what risks it is currently facing. To that end, you should learn about the 5 warning signs we've spotted with Dexco (including 1 which doesn't sit too well with us).

If you are no longer interested in Dexco, 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.