Should You Think About Buying Alfa, S.A.B. de C.V. (BMV:ALFAA) Now?

Alfa, S.A.B. de C.V. (BMV:ALFAA), is not the largest company out there, but it led the BMV gainers with a relatively large price hike in the past couple of weeks. 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. But what if there is still an opportunity to buy? Let’s examine Alfa. de’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Alfa. de

What's the opportunity in Alfa. de?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 12% below my intrinsic value, which means if you buy Alfa. de today, you’d be paying a fair price for it. And if you believe the company’s true value is MX$15.60, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Alfa. de’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 kind of growth will Alfa. de generate?

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 Alfa. de, it is expected to deliver a relatively unexciting top-line growth of 6.6% in the next few years, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? It seems like the market has already priced in ALFA A’s future outlook, with shares trading around its fair value. 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 the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on ALFA A, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth diving deeper into 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 Alfa. de at this point in time. For example, Alfa. de has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

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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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