At CL$835, Is Parque Arauco S.A. (SNSE:PARAUCO) Worth Looking At Closely?

While Parque Arauco S.A. (SNSE:PARAUCO) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the SNSE 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. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Parque Arauco’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Parque Arauco

What is Parque Arauco worth?

Parque Arauco appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 Parque Arauco’s ratio of 32.27x is above its peer average of 8.35x, which suggests the stock is trading at a higher price compared to the Real Estate industry. Another thing to keep in mind is that Parque Arauco’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 does the future of Parque Arauco look like?

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. Parque Arauco'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? It seems like the market has well and truly priced in PARAUCO’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe PARAUCO 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 PARAUCO 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 optimistic prospect is encouraging for PARAUCO, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Parque Arauco, you'd also look into what risks it is currently facing. For example, we've found that Parque Arauco has 2 warning signs (1 can't be ignored!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Parque Arauco, 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.