Is There Now An Opportunity In SIMPAR S.A. (BVMF:SIMH3)?

SIMPAR S.A. (BVMF:SIMH3), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the BOVESPA. 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 SIMPAR’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for SIMPAR

What's The Opportunity In SIMPAR?

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. 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 SIMPAR’s ratio of 11.1x is trading slightly below its industry peers’ ratio of 11.3x, which means if you buy SIMPAR today, you’d be paying a reasonable price for it. And if you believe that SIMPAR should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. In addition to this, it seems like SIMPAR’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will SIMPAR 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. SIMPAR's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? SIMH3’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at SIMH3? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on SIMH3, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for SIMH3, 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.

So while earnings quality is important, it's equally important to consider the risks facing SIMPAR at this point in time. To help with this, we've discovered 4 warning signs (2 are a bit concerning!) that you ought to be aware of before buying any shares in SIMPAR.

If you are no longer interested in SIMPAR, 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.