At R$14.67, Is Positivo Tecnologia S.A. (BVMF:POSI3) Worth Looking At Closely?

Positivo Tecnologia S.A. (BVMF:POSI3), is not the largest company out there, but it received a lot of attention from a substantial price increase on the BOVESPA over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Positivo Tecnologia’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Positivo Tecnologia

What is Positivo Tecnologia worth?

Great news for investors – Positivo Tecnologia is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Positivo Tecnologia’s ratio of 8.23x is below its peer average of 22.21x, which indicates the stock is trading at a lower price compared to the Tech industry. What’s more interesting is that, Positivo Tecnologia’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 Positivo Tecnologia 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. 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. 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 Positivo Tecnologia, at least in the near future.

What this means for you:

Are you a shareholder? Although POSI3 is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to POSI3, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on POSI3 for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To that end, you should learn about the 3 warning signs we've spotted with Positivo Tecnologia (including 2 which make us uncomfortable).

If you are no longer interested in Positivo Tecnologia, 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. 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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