Is It Time To Consider Buying Movida Participações S.A. (BVMF:MOVI3)?

By
Simply Wall St
Published
February 23, 2022
BOVESPA:MOVI3
Source: Shutterstock

Movida Participações S.A. (BVMF:MOVI3), might not be a large cap stock, but it led the BOVESPA gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Movida Participações’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Movida Participações

Is Movida Participações still cheap?

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 8.5x is currently trading slightly below its industry peers’ ratio of 13.14x, which means if you buy Movida Participações today, you’d be paying a decent price for it. And if you believe Movida Participações 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. Although, there may be an opportunity to buy in the future. This is because Movida Participações’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Movida Participações generate?

earnings-and-revenue-growth
BOVESPA:MOVI3 Earnings and Revenue Growth February 23rd 2022

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. Movida Participações' earnings over the next few years are expected to increase by 35%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in MOVI3’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at MOVI3? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on MOVI3, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for MOVI3, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Movida Participações as a business, it's important to be aware of any risks it's facing. For example, we've found that Movida Participações has 4 warning signs (2 are a bit unpleasant!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Movida Participações, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.