Is It Too Late To Consider Buying Sonae, SGPS, S.A. (ELI:SON)?

Sonae, SGPS, S.A. (ELI:SON), might not be a large cap stock, but it saw significant share price movement during recent months on the ENXTLS, rising to highs of €1.04 and falling to the lows of €0.90. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Sonae SGPS' current trading price of €0.90 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Sonae SGPS’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Sonae SGPS

What Is Sonae SGPS Worth?

Good news, investors! Sonae SGPS is still a bargain right now. According to my valuation, the intrinsic value for the stock is €1.21, but it is currently trading at €0.90 on the share market, meaning that there is still an opportunity to buy now. However, given that Sonae 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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Sonae 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. 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 Sonae SGPS, at least in the near future.

What This Means For You

Are you a shareholder? Although SON is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to SON, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on SON for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Sonae SGPS has 1 warning sign we think you should be aware of.

If you are no longer interested in Sonae 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.