Should You Think About Buying EcoRodovias Infraestrutura e Logística S.A. (BVMF:ECOR3) Now?

EcoRodovias Infraestrutura e Logística S.A. (BVMF:ECOR3), 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. With many analysts covering the 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 EcoRodovias Infraestrutura e Logística’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for EcoRodovias Infraestrutura e Logística

What's The Opportunity In EcoRodovias Infraestrutura e Logística?

EcoRodovias Infraestrutura e Logística is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison 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 EcoRodovias Infraestrutura e Logística’s ratio of 27.52x is above its peer average of 18.46x, which suggests the stock is trading at a higher price compared to the Infrastructure industry. Another thing to keep in mind is that EcoRodovias Infraestrutura e Logística’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

What kind of growth will EcoRodovias Infraestrutura e Logística 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. 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 profit expected to more than double over the next couple of years, the future seems bright for EcoRodovias Infraestrutura e Logística. 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? ECOR3’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe ECOR3 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ECOR3 for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for ECOR3, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about EcoRodovias Infraestrutura e Logística as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for EcoRodovias Infraestrutura e Logística and we think they deserve your attention.

If you are no longer interested in EcoRodovias Infraestrutura e Logística, 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.