When Should You Buy Lojas Renner S.A. (BVMF:LREN3)?

While Lojas Renner S.A. (BVMF:LREN3) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the BOVESPA, rising to highs of R$46.28 and falling to the lows of R$34.24. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Lojas Renner's current trading price of R$34.24 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Lojas Renner’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Lojas Renner

What's the opportunity in Lojas Renner?

The stock is currently trading at R$34.24 on the share market, which means it is overvalued by 40% compared to my intrinsic value of R$24.50. This means that the buying opportunity has probably disappeared for now. Furthermore, Lojas Renner’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 true value, 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 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. Lojas Renner's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? LREN3’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe LREN3 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on LREN3 for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for LREN3, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 4 warning signs with Lojas Renner, and understanding these 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.

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.

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