Is Prosegur Compañía de Seguridad, S.A. (BME:PSG) Potentially Undervalued?

Prosegur Compañía de Seguridad, S.A. (BME:PSG), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the BME. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine Prosegur Compañía de Seguridad’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Prosegur Compañía de Seguridad

What is Prosegur Compañía de Seguridad worth?

According to my valuation model, Prosegur Compañía de Seguridad seems to be fairly priced at around 0.43% above my intrinsic value, which means if you buy Prosegur Compañía de Seguridad today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth €2.37, then there isn’t really any room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Prosegur Compañía de Seguridad’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Prosegur Compañía de Seguridad 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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Prosegur Compañía de Seguridad, at least in the near future.

What this means for you:

Are you a shareholder? PSG seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on PSG for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on PSG should the price fluctuate below its true value.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Prosegur Compañía de Seguridad.

If you are no longer interested in Prosegur Compañía de Seguridad, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

If you’re looking to trade Prosegur Compañía de Seguridad, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.