Is Sonae, SGPS, S.A. (ELI:SON) Potentially Undervalued?

While Sonae, SGPS, S.A. (ELI:SON) might not have the largest market cap around , it received a lot of attention from a substantial price increase on the ENXTLS over the last few months. The company is now trading at yearly-high levels following the recent surge in its share price. 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, could the stock still be trading at a relatively cheap price? Let’s examine Sonae SGPS’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

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Is Sonae SGPS Still Cheap?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 2.8% below our intrinsic value, which means if you buy Sonae SGPS today, you’d be paying a fair price for it. And if you believe that the stock is really worth €1.32, then there’s not much of an upside to gain from mispricing. Furthermore, Sonae SGPS’s low beta implies that the stock is less volatile than the wider market.

View our latest analysis for Sonae SGPS

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. 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. With profit expected to grow by a double-digit 17% over the next couple of years, the outlook is positive for Sonae SGPS. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in SON’s positive 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 SON, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To that end, you should learn about the 2 warning signs we've spotted with Sonae SGPS (including 1 which can't be ignored).

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.