When Should You Buy Grupo SBF S.A. (BVMF:SBFG3)?

While Grupo SBF S.A. (BVMF:SBFG3) might not be the most widely known stock at the moment, it led the BOVESPA gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Grupo SBF’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Grupo SBF

Is Grupo SBF still cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 10.35x is currently trading in-line with its industry peers’ ratio, which means if you buy Grupo SBF today, you’d be paying a relatively sensible price for it. So, is there another chance to buy low in the future? Given that Grupo SBF’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Grupo SBF generate?

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. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Grupo SBF, at least in the near future.

What this means for you:

Are you a shareholder? Currently, SBFG3 appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on SBFG3, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on SBFG3 for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on SBFG3 should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing Grupo SBF at this point in time. You'd be interested to know, that we found 2 warning signs for Grupo SBF and you'll want to know about these.

If you are no longer interested in Grupo SBF, 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.