Why Cielo S.A. (BVMF:CIEL3) Could Be Worth Watching

While Cielo S.A. (BVMF:CIEL3) 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 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 I will analyse the most recent data on Cielo’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Cielo

What's the opportunity in Cielo?

Great news for investors – Cielo is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is R$3.71, but it is currently trading at R$2.64 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Cielo’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Cielo 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. Cielo's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since CIEL3 is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on CIEL3 for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy CIEL3. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. When we did our research, we found 2 warning signs for Cielo (1 is a bit concerning!) that we believe deserve your full attention.

If you are no longer interested in Cielo, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.