At €14.94, Is Jumbo S.A. (ATH:BELA) Worth Looking At Closely?

Jumbo S.A. (ATH:BELA), might not be a large cap stock, but it saw a decent share price growth in the teens level on the ATSE over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Jumbo’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Jumbo

What's the opportunity in Jumbo?

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 Jumbo’s ratio of 9.39x is trading slightly below its industry peers’ ratio of 10.35x, which means if you buy Jumbo today, you’d be paying a reasonable price for it. And if you believe Jumbo should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like Jumbo’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 Jumbo?

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. 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. Though in the case of Jumbo, it is expected to deliver a negative earnings growth of -10%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Currently, BELA appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk 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 BELA, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on BELA for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This 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 BELA should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing Jumbo at this point in time. Case in point: We've spotted 2 warning signs for Jumbo you should be mindful of and 1 of them can't be ignored.

If you are no longer interested in Jumbo, 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.