In This Article:
Corticeira Amorim SGPS SA (ELI:COR), a €1.55b small-cap, operates in the basic materials industry which is sensitive to changes in the business cycle, as it supplies materials for construction activities. Basic material analysts are forecasting for the entire industry, a positive double-digit growth of 15.8% in the upcoming year , and a robust short-term growth of 27.1% over the next couple of years. This rate is larger than the growth rate of the PT stock market as a whole. Today, I will analyse the industry outlook, and also determine whether Corticeira Amorim S.G.P.S is a laggard or leader relative to its basic materials sector peers.
See our latest analysis for Corticeira Amorim S.G.P.S
What’s the catalyst for Corticeira Amorim S.G.P.S’s sector growth?
The sector seems like it has reached maturity in its life cycle, with highly competitive companies and inevitable consolidation. Over the past year, the industry saw growth in the twenties, beating the PT market growth of 14.4%. Corticeira Amorim S.G.P.S lags the pack with its negative growth rate of -27.4% over the past year, which indicates the company has been growing at a slower pace than its forest products peers. Although Corticeira Amorim S.G.P.S is poised to deliver a 1.1% growth next year, moving it from negative to positive territory, it still lags its industry average rate of growth of 15.8%.
Is Corticeira Amorim S.G.P.S and the sector relatively cheap?
The forest products industry is trading at a PE ratio of 13.04x, relatively similar to the rest of the PT stock market PE of 12.82x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 17.3% compared to the market’s 12.9%, potentially illustrative of past tailwinds. On the stock-level, Corticeira Amorim S.G.P.S is trading at a higher PE ratio of 20.24x, making it more expensive than the average forest products stock. In terms of returns, Corticeira Amorim S.G.P.S generated 17.3% in the past year, in-line with its industry average.
Next Steps:
Corticeira Amorim S.G.P.S is a forest products industry laggard in terms of its future growth outlook. In addition to this, the stock is trading at a PE above its peers, meaning it is more expensive on a relative earnings basis.If Corticeira Amorim S.G.P.S has been on your watchlist for a while, now may not be the best time to enter into the stock. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the materials sector. However, before you make a decision on the stock, I suggest you look at Corticeira Amorim S.G.P.S’s fundamentals in order to build a holistic investment thesis.