At R$26.20, Is It Time To Put Lojas Renner S.A. (BVMF:LREN3) On Your Watch List?

Lojas Renner S.A. (BVMF:LREN3), 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. 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, what if the stock is still a bargain? Let’s examine Lojas Renner’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Lojas Renner

What's the opportunity in Lojas Renner?

According to my valuation model, Lojas Renner seems to be fairly priced at around 9.6% below my intrinsic value, which means if you buy Lojas Renner today, you’d be paying a fair price for it. And if you believe the company’s true value is R$28.99, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, Lojas Renner has a low beta, which suggests its share price is less volatile than the wider market.

Can we expect growth from Lojas Renner?

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. 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. With profit expected to more than double over the next couple of years, the future seems bright for Lojas Renner. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has already priced in LREN3’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on LREN3, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 5 warning signs with Lojas Renner, and understanding them should be part of your investment process.

If you are no longer interested in Lojas Renner, 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.