Why Lojas Renner S.A. (BVMF:LREN3) Could Be Worth Watching

While Lojas Renner S.A. (BVMF:LREN3) might not be the most widely known stock at the moment, 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, what if the stock is still a bargain? Today I 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's The Opportunity In Lojas Renner?

According to my valuation model, Lojas Renner seems to be fairly priced at around 12.35% above my intrinsic value, which means if you buy Lojas Renner today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth R$24.74, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, Lojas Renner’s low beta implies that the stock is less volatile than the wider market.

Can we expect growth from Lojas Renner?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 88% 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? LREN3’s optimistic future growth appears to have been factored into the current share price, 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 tabs on LREN3, now may not be the most optimal 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 3 warning signs 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.