When Should You Buy CTT - Correios De Portugal, S.A. (ELI:CTT)?

While CTT - Correios De Portugal, S.A. (ELI:CTT) might not be the most widely known stock at the moment, it led the ENXTLS gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the 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 CTT - Correios De Portugal’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for CTT - Correios De Portugal

Is CTT - Correios De Portugal still cheap?

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. I’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 32.04x is currently trading slightly above its industry peers’ ratio of 28.19x, which means if you buy CTT - Correios De Portugal today, you’d be paying a relatively sensible price for it. And if you believe that CTT - Correios De Portugal should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, CTT - Correios De Portugal’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What kind of growth will CTT - Correios De Portugal 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. 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. CTT - Correios De Portugal's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? CTT’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 CTT? 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 tabs on CTT, 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 CTT, 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.

So while earnings quality is important, it's equally important to consider the risks facing CTT - Correios De Portugal at this point in time. For example - CTT - Correios De Portugal has 5 warning signs we think you should be aware of.

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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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