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

Moura Dubeux Engenharia S.A. (BVMF:MDNE3), is not the largest company out there, but it saw a double-digit share price rise of over 10% 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? Today I will analyse the most recent data on Moura Dubeux Engenharia’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Moura Dubeux Engenharia

What Is Moura Dubeux Engenharia Worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Moura Dubeux Engenharia’s ratio of 4.44x is trading slightly below its industry peers’ ratio of 7.37x, which means if you buy Moura Dubeux Engenharia today, you’d be paying a reasonable price for it. And if you believe that Moura Dubeux Engenharia should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since Moura Dubeux Engenharia’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 Moura Dubeux Engenharia?

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. In the upcoming year, Moura Dubeux Engenharia's earnings are expected to increase by 46%, 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? It seems like the market has already priced in MDNE3’s positive outlook, 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 confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs 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.

If you'd like to know more about Moura Dubeux Engenharia as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Moura Dubeux Engenharia you should know about.

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.