WEG S.A.

WEGE3
End-of-day quote. End-of-day quote  - 10/26
82.75BRL +1.32%

WEG S.A. : The underlying trend is in force again

Nicolas Aleksy
Contributor / Partner

Strategy published on : 09/24/2020 | 05:15

long trade
Target price hit

Entry price : 62.5BRL
Target : 69BRL
Stop-loss : 59BRL
Potential : 10.4%

The underlying tendency is to the upside for shares in WEG S.A. and the timing is opportune to get back into the stock. A comeback of the upward dynamic can be anticipated.
Investors have an opportunity to buy the stock and target the BRL 69.

Summary

● The company has strong fundamentals. More than 70% of listed companies have a lower mix of growth, profitability, debt and visibility criteria.


Strengths

● Its core activity has a significant growth potential and sales are expected to surge, according to Standard & Poor's' forecast. Indeed, those may increase by 50% by 2022.

● The company is in a robust financial situation considering its net cash and margin position.

● Over the last 4 months, analysts have significantly revised upwards the company's estimated sales.

● Over the past year, analysts have regularly revised upwards their sales forecast for the company.

● Over the last seven days, analysts have been revising upwards their EPS estimates for the company.

● Analysts remain confident with respect to the group's activity and, more often than not, have revised upwards their earnings per share estimates.

● The stock is in a well-established, long-term rising trend above the technical support level at 44.25 BRL


Weaknesses

● Stock prices approach a strong long-term resistance in weekly data at BRL 69.17.

● The company's "enterprise value to sales" ratio is among the highest in the world.

● With an expected P/E ratio at 68.39 and 57.14 respectively for both the current and next fiscal years, the company operates with high earnings multiples.

● The company is not the most generous with respect to shareholders' compensation.

● The appreciation potential seems limited due to the average target prices set by the analysts covering the stock.

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