Some investors are looking for long-term opportunities in the financial markets, while others are wondering what will be next for Magalu. The fact is that everyone wants to find that asset that will increase their investment portfolio.
When we think of stocks with great growth potential, what comes to mind are small caps. These companies are known for having a lower market value than what are considered stock market giants, such as Petrobras (PETR4) and Vale (VALE3), for example.
However, the current macroeconomic scenario, with a base interest rate, Selic, of 13.75% per annum, makes it increasingly difficult to find stocks that can offer better risk and return conditions than fixed income.
Taken into consideration that, Agency TradeMap conducted a survey to find out which listed companies have, according to the market consensus, the greatest potential for appreciation (up).
Data, based on information from Refinitive available on the TradeMap platform, show the difference between the prices that analysts think the stock should be worth – the famous “fair price” – compared to the stock’s closing value on Friday (17
Among the 20 stocks with the highest appreciation potential, 14 have the potential to more than double investors’ capital, and 15 can be considered small-cap because their market value is below R$10 billion.
Check out the order below:
The large number of lowercase letters in the list is no coincidence. After all, it is easier for a company with a 2 billion BRL market value to double than a company with 500 billion BRL.
But even with strong upside potential, experts don’t see all companies as obvious buys, as there are risks lurking that could thwart this potential appreciation.
Take a look at the six most desirable companies on the stock market
Sequoia Logistics (SEQL3)
Sequoia Logística, which operates across Brazil in the transportation and logistics segment with e-commerce-focused solutions, is the role with the highest potential for appreciation, according to the compilation Refinitive.
In October 2020, exactly two years ago, the company went public and saw the value of its shares skyrocket, fueled by the intensification of e-commerce during the Covid-19 pandemic.
However, since July 2021, the value of stocks has gone downhill, pressured by high levels of inflation and the resulting rise in interest rates, factors that hurt consumption.
The war between Russia and Ukraine in Eastern Europe, which began at the end of February this year, has only intensified the inflationary scenario, imposing more logistical bottlenecks and causing supply chains to collapse.
The combination of these elements led to a decline in Sequoia’s profitability, primarily through rising oil prices – the company’s main expense – but also through rising interest costs.
However, the company operates according to the “asset light” model, operating with the smallest possible volume of its own assets. Almost all of Sequoia’s fleet and structure (97%) is leased or leased, for example.
This enables the company to reduce costs and expenses, such as depreciation, vehicle maintenance, among others, balancing the profitability of the business while expanding its cash generation capacity.
This model allows the company to focus its capital on operational improvements and acquisitions for expansion, rather than investing in fleet and equipment renewal.
Another positive point for an eventual turning point for the company is the expectation of an inversion of the yield curve and control of inflation. This should reheat the market and increase the sales volume of retail companies.
As a result, Sequoia should generate higher revenues in that period and generate more cash in the coming years.
In addition, the company allows investors to participate in the retail sector without having to expose themselves to high competition between stores in the segment, which tends to hurt the margins of those companies.
In the case of Sequoia, the effect is the opposite: the greater the competition among retail chains, the better for the company, which diversifies its customers, reducing risk.
By operating throughout Brazil, the company can meet the demand of all retailers and maximize profits, given that the logistics and e-commerce services sector is under-penetrated and has great opportunities for growth.
According to the data he collected Refinitive, the market recommendation for the stock is buy – defends the purchase of shares by four out of five surveyed analysts. Only one gives a neutral recommendation – neither buy nor sell.
Marfrig, a company that manufactures built-in food and refrigerators, has been in trouble in recent months. This year alone, the company’s shares devalued by 50%.
Minerva (BEEF3) is shining, but what to expect from shares of Marfrig (MFRG3), BRF (BRFS3) and JBS (JBSS3)?
After taking over 33.2% of BRF, the company became dominant not only in the beef protein market, but also entered the poultry and pork segment. However, the acquisition has not yet had a positive effect. On the contrary: the company began to incur higher costs.
The purchase of the stake in BRF, on the one hand, gave Marfrig market space in other regions and diversified its products, reducing the risks associated with the cycles of each protein and reducing the company’s exposure to one area of activity. On the other hand, operational difficulties with the new president of the board, who worked in another area, and low business synergy may make it difficult to improve results.
Analysts’ expectations should be based on the maturation of this synergy, which should be better utilized in the medium term, and on heating up the consumption of beef proteins on the Chinese market.
If this happens, Marfrig would have higher profitability and profit because the amount of sales would increase, but the fixed cost would remain the same. For example, a 10% increase in revenue could lead to a 20% increase in operating profit.
This expectation of higher cash flows in the future implies a potentially greater ability of the company to generate shareholder value. This is a point that analysts take into account when pricing assets.
It is important to pay attention to Marfrig’s currency risk, since almost 75% of the company’s revenue is denominated in dollars. Therefore, a currency devaluation or a slowdown in meat consumption in the North American market can directly affect the company’s results.
Marfrig shares are currently trading at a 77% discount to share capital. That is, the company’s capital is greater than the company’s market value – an indication that the stock may be cheap.
It is worth mentioning that this share capital includes BRF’s balance sheet in the company’s consolidated balance sheet. Therefore, there may be deviations regarding the actual value.
According to the compilation of Refinitive, analysts are divided on what to do with Marfrig’s stock. Among the 16 analysts, eight recommend neutrality – neither buy nor sell – while eight suggest buying the stock.
3R Petroleum (RRRP3)
3R Petroleum is the latest investor favorite when it comes to the oil, gas and energy sector.
The company is an independent oil producer with a business model focused on the revitalization of mature fields. This offers less risk as it is not dependent on oil exploration.
This year alone, the company started working in four new centers, and productivity has almost doubled. At the beginning of the year, production amounted to 8,900 barrels of oil equivalent per day, and in September this figure increased to 16,400.
In addition, another hub should be included this year, and the Potiguar hub next year, which has a greater potential for reserves and production growth.
This hunger for new jobs is reflected in more money creation in the future.
What attracts investors is the fact that stock prices appear to be discounting the company’s potential to increase oil and natural gas production from mature assets. This expected jump in productivity could translate into greater shareholder value.
3R Petroleum (RRRP3): Share Price Ignores Production Increase, BofA Says; paper becomes more expensive by about 10%
As a growth company that invests heavily in acquisitions and operational improvements to reap future rewards, 3R Petroleum’s price-to-earnings ratio is negative.
This is because the company recorded a 12-month loss, as a result of higher financial expenses, especially in the first quarter of this year.
About 79% of the cash was allocated to investments related to the dollar, which depreciated in the first quarter. This, along with the costs associated with hedge goods, brought the company a loss of R$ 335.2 million in the period from January to March.
Therefore, it is important to pay attention to risks that are not directly related to the transaction, such as exchange rates and commodity prices. These factors can affect the profitability of the company according to the fluctuations of supply and demand in the global market.
On the other hand, from the moment business is concluded in these new fields, cash generation tends to be higher, which brings more profit to the company, with better profitability.
Compiled for analysts Refinitive the recommendation for 3R shares is unanimous, with nine ratings.