Is Multiplan Empreendimentos Imobiliários S.A. (BVMF:MULT3) Potentially Undervalued?

Multiplan Empreendimentos Imobiliários S.A. (BVMF:MULT3), is not the largest company out there, but it led the BOVESPA gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Multiplan Empreendimentos Imobiliários’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Multiplan Empreendimentos Imobiliários

Is Multiplan Empreendimentos Imobiliários still cheap?

Good news, investors! Multiplan Empreendimentos Imobiliários is still a bargain right now according to my price multiple model, which compares 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 Multiplan Empreendimentos Imobiliários’s ratio of 16.97x is below its peer average of 23.08x, which indicates the stock is trading at a lower price compared to the Real Estate industry. What’s more interesting is that, Multiplan Empreendimentos Imobiliários’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Multiplan Empreendimentos Imobiliários generate?

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. 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 Multiplan Empreendimentos Imobiliários, at least in the near future.

What this means for you:

Are you a shareholder? Although MULT3 is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to MULT3, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on MULT3 for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 4 warning signs for Multiplan Empreendimentos Imobiliários (of which 2 are a bit unpleasant!) you should know about.

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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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