Is Now The Time To Look At Buying Mota-Engil, SGPS, S.A. (ELI:EGL)?

Mota-Engil, SGPS, S.A. (ELI:EGL), 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 ENXTLS. As a small cap stock, which tends to lack high analyst coverage, 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? Today I will analyse the most recent data on Mota-Engil SGPS’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Mota-Engil SGPS

What Is Mota-Engil SGPS Worth?

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 Mota-Engil SGPS’s ratio of 16.33x is trading slightly above its industry peers’ ratio of 11.58x, which means if you buy Mota-Engil SGPS today, you’d be paying a relatively reasonable price for it. And if you believe that Mota-Engil SGPS should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Is there another opportunity to buy low in the future? Since Mota-Engil SGPS’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 does the future of Mota-Engil SGPS look like?

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. Mota-Engil SGPS' earnings over the next few years are expected to increase by 93%, 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 financial strength of the company. Have these factors changed since the last time you looked at EGL? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on EGL, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast 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.

If you want to dive deeper into Mota-Engil SGPS, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Mota-Engil SGPS and we think they deserve your attention.

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.