Is Now The Time To Look At Buying Lojas Renner S.A. (BVMF:LREN3)?

While Lojas Renner S.A. (BVMF:LREN3) might not have the largest market cap around , it saw a significant share price rise of 52% in the past couple of months on the BOVESPA. The company is now trading at yearly-high levels following the recent surge in its share price. 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, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on Lojas Renner’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Lojas Renner

What Is Lojas Renner Worth?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Lojas Renner’s ratio of 15.23x is trading slightly below its industry peers’ ratio of 15.23x, which means if you buy Lojas Renner today, you’d be paying a reasonable price for it. And if you believe that Lojas Renner 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. Furthermore, Lojas Renner’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What does the future of Lojas Renner 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. 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 grow by 54% 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 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 LREN3? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

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 industry price multiples. However, the positive outlook is encouraging for LREN3, which means it’s worth further examining 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. Every company has risks, and we've spotted 1 warning sign for Lojas Renner you should know about.

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.