Is Now The Time To Look At Buying Petrobras Distribuidora S.A. (BVMF:BRDT3)?

Petrobras Distribuidora S.A. (BVMF:BRDT3), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the BOVESPA over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Petrobras Distribuidora’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Petrobras Distribuidora

Is Petrobras Distribuidora still cheap?

Great news for investors – Petrobras Distribuidora is still trading at a fairly cheap price according to my price multiple model, where I compare 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 Petrobras Distribuidora’s ratio of 7.39x is below its peer average of 19.25x, which indicates the stock is trading at a lower price compared to the Specialty Retail industry. Petrobras Distribuidora’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What does the future of Petrobras Distribuidora look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 Petrobras Distribuidora, at least in the near future.

What this means for you:

Are you a shareholder? Although BRDT3 is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to BRDT3, 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 tabs on BRDT3 for some time, 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.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Be aware that Petrobras Distribuidora is showing 5 warning signs in our investment analysis and 3 of those don't sit too well with us...

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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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