When Should You Buy Moura Dubeux Engenharia S.A. (BVMF:MDNE3)?

While Moura Dubeux Engenharia S.A. (BVMF:MDNE3) might not be the most widely known stock at the moment, it led the BOVESPA gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on Moura Dubeux Engenharia’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Moura Dubeux Engenharia

What's The Opportunity In Moura Dubeux Engenharia?

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. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 6.73x is currently trading slightly below its industry peers’ ratio of 10.16x, which means if you buy Moura Dubeux Engenharia today, you’d be paying a decent price for it. And if you believe Moura Dubeux Engenharia 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. Although, there may be an opportunity to buy in the future. This is because Moura Dubeux Engenharia’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Moura Dubeux Engenharia 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. Moura Dubeux Engenharia's earnings over the next few years are expected to increase by 93%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? MDNE3’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at MDNE3? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on MDNE3, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for MDNE3, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. At Simply Wall St, we have the analysts estimates which you can view by clicking here.

If you are no longer interested in Moura Dubeux Engenharia, 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.