When Should You Buy Nicolás Correa, S.A. (BME:NEA)?

Nicolás Correa, S.A. (BME:NEA), is not the largest company out there, but it saw significant share price movement during recent months on the BME, rising to highs of €5.30 and falling to the lows of €4.25. 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 Nicolás Correa's current trading price of €4.25 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 Nicolás Correa’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Nicolás Correa

Is Nicolás Correa Still Cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Nicolás Correa’s ratio of 9.23x is trading slightly below its industry peers’ ratio of 11.21x, which means if you buy Nicolás Correa today, you’d be paying a decent price for it. And if you believe that Nicolás Correa 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 Nicolás Correa’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.

Can we expect growth from Nicolás Correa?

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. Nicolás Correa's earnings over the next few years are expected to increase by 37%, 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 NEA’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 track record of its management team. Have these factors changed since the last time you looked at NEA? 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 NEA, 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 NEA, 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 Nicolás Correa at this point in time. Case in point: We've spotted 2 warning signs for Nicolás Correa you should be aware of.

If you are no longer interested in Nicolás Correa, 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.