Is It Too Late To Consider Buying Mota-Engil, SGPS, S.A. (ELI:EGL)?

While Mota-Engil, SGPS, S.A. (ELI:EGL) might not have the largest market cap around , it saw a significant share price rise of 67% in the past couple of months on the ENXTLS. The recent jump in the share price has meant that the company is trading at close to its 52-week high. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Mota-Engil SGPS’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Our free stock report includes 4 warning signs investors should be aware of before investing in Mota-Engil SGPS. Read for free now.

What's The Opportunity In Mota-Engil SGPS?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 11.77x is currently trading slightly below its industry peers’ ratio of 13.77x, which means if you buy Mota-Engil SGPS today, you’d be paying a decent price for it. And if you believe Mota-Engil SGPS 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. So, is there another chance to buy low in the future? Given that Mota-Engil SGPS’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.

Check out our latest analysis for Mota-Engil SGPS

Can we expect growth from Mota-Engil SGPS?

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. Mota-Engil SGPS' earnings over the next few years are expected to increase by 24%, 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? EGL’s optimistic future growth appears to have been factored into the current share price, 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 EGL? 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 tabs on EGL, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for EGL, 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 4 warning signs for Mota-Engil SGPS you should be mindful of and 1 of them is a bit unpleasant.

If you are no longer interested in Mota-Engil SGPS, 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.