Gerdau S.A. : The underlying trend is to the upside

11/19/2020 | 03:21am EST

Nicolas Aleksy

long trade Target price hit

Entry price : 20.97BRL | Target : 23.5BRL | Stop-loss : 19.5BRL | Potential : 12.06%

Gerdau S.A.'s shares display attractive technical aspects to anticipate a comeback of the underlying trend. Investors have an opportunity to buy the stock and target the BRL 23.5.

Summary

• The company has strong fundamentals. More than 70% of listed companies have a lower mix of growth, profitability, debt and visibility criteria.
• The company has solid fundamentals for a short-term investment strategy.

Strengths

• As regards fundamentals, the enterprise value to sales ratio is at 1.13 for the current period. Therefore, the company is undervalued.
• Over the last 4 months, analysts have significantly revised upwards the company's estimated sales.
• Over the last seven days, analysts have been revising upwards their EPS estimates for the company.
• For the past twelve months, EPS forecast has been revised upwards.
• Within the weekly time frame the stock shows a bullish technical configuration above the support level at 14.71 BRL

Weaknesses

• The share is close to its long-term resistance in weekly data. Therefore, the potential should be limited. However, a further bullish movement when crossing this resistance will be a positive signal.
• Prospects from analysts covering the stock are not consistent. Such dispersed sales estimates confirm the poor visibility into the group's activity.
• The group usually releases earnings worse than estimated.
• The firm pays small or no dividend to shareholders. For that reason, it is not a yield company.

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