When Should You Buy Vibra Energia S.A. (BVMF:VBBR3)?

While Vibra Energia S.A. (BVMF:VBBR3) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the BOVESPA over the last few months. 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. But what if there is still an opportunity to buy? Let’s take a look at Vibra Energia’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Vibra Energia

What's the opportunity in Vibra Energia?

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 9.85x is currently trading slightly below its industry peers’ ratio of 12.58x, which means if you buy Vibra Energia today, you’d be paying a decent price for it. And if you believe Vibra Energia should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like Vibra Energia’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Vibra Energia?

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. Though in the case of Vibra Energia, it is expected to deliver a negative earnings growth of -7.4%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Currently, VBBR3 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 optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on VBBR3, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on VBBR3 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. In addition to this, 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 gel your views on VBBR3 should the price fluctuate below the industry PE ratio.

If you want to dive deeper into Vibra Energia, you'd also look into what risks it is currently facing. To that end, you should learn about the 5 warning signs we've spotted with Vibra Energia (including 2 which make us uncomfortable).

If you are no longer interested in Vibra Energia, 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.