At R$6.01, Is Serena Energia S.A. (BVMF:SRNA3) Worth Looking At Closely?

Serena Energia S.A. (BVMF:SRNA3), might not be a large cap stock, but it saw significant share price movement during recent months on the BOVESPA, rising to highs of R$9.05 and falling to the lows of R$6.01. 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 Serena Energia's current trading price of R$6.01 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 Serena Energia’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Serena Energia

What Is Serena Energia Worth?

Serena Energia appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Serena Energia’s ratio of 17.46x is above its peer average of 11.29x, which suggests the stock is trading at a higher price compared to the Renewable Energy industry. In addition to this, it seems like Serena Energia’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Serena Energia?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 7.9% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Serena Energia, at least in the short term.

What This Means For You

Are you a shareholder? SRNA3’s future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe SRNA3 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 tabs on SRNA3 for some time, 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 growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, Serena Energia has 2 warning signs (and 1 which is concerning) we think you should know about.

If you are no longer interested in Serena Energia, 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.