At R$7.86, Is It Time To Put Positivo Tecnologia S.A. (BVMF:POSI3) On Your Watch List?

Positivo Tecnologia S.A. (BVMF:POSI3), is not the largest company out there, but it received a lot of attention from a substantial price movement on the BOVESPA over the last few months, increasing to R$13.38 at one point, and dropping to the lows of R$7.86. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Positivo Tecnologia's current trading price of R$7.86 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Positivo Tecnologia’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Our analysis indicates that POSI3 is potentially undervalued!

What's The Opportunity In Positivo Tecnologia?

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 5.31x is below its peer average of 13.3x, which indicates the stock is trading at a lower price compared to the Tech industry. However, given that Positivo Tecnologia’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Positivo Tecnologia generate?

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 revenues expected to grow by 43% over the next couple of years, the future seems bright for Positivo Tecnologia. If the level of expenses is able to be maintained, 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? Since POSI3 is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic 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 capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on POSI3 for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy POSI3. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've found that Positivo Tecnologia has 5 warning signs (2 are potentially serious!) that deserve your attention before going any further with your analysis.

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. 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.