Is It Time To Consider Buying Prosegur Cash, S.A. (BME:CASH)?

While Prosegur Cash, S.A. (BME:CASH) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the BME over the last few months, increasing to €0.86 at one point, and dropping to the lows of €0.73. 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 Prosegur Cash's current trading price of €0.80 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 Prosegur Cash’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 Prosegur Cash

What is Prosegur Cash worth?

Prosegur Cash 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 Prosegur Cash’s ratio of 59.8x is above its peer average of 24.53x, which suggests the stock is trading at a higher price compared to the Commercial Services industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Prosegur Cash’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Prosegur Cash look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. With profit expected to more than double over the next couple of years, the future seems bright for Prosegur Cash. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? CASH’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe CASH 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 an eye on CASH for a while, 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 outlook is encouraging for CASH, which means it’s worth diving deeper into other factors 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 Prosegur Cash at this point in time. Case in point: We've spotted 3 warning signs for Prosegur Cash you should be aware of.

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This article by Simply Wall St is general in nature. 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.
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