JHSF Participações S.A. (BVMF:JHSF3), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the BOVESPA. As a small cap stock, which tends to lack high analyst coverage, 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? Let’s examine JHSF Participações’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for JHSF Participações
Is JHSF Participações still cheap?
According to my valuation model, JHSF Participações seems to be fairly priced at around 7.2% below my intrinsic value, which means if you buy JHSF Participações today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth R$8.46, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because JHSF Participações’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.
Can we expect growth from JHSF Participações?
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 JHSF Participações, at least in the near future.
What this means for you:
Are you a shareholder? JHSF3 seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in 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 the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on JHSF3 for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, 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 crystalize your views on JHSF3 should the price fluctuate below its true value.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Our analysis shows 3 warning signs for JHSF Participações (2 are potentially serious!) and we strongly recommend you look at them before investing.
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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.
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About BOVESPA:JHSF3
JHSF Participações
Through its subsidiaries, engages in the real estate development business.
Reasonable growth potential low.
