The average target price of IRBR3.SA is 56 and suggests 19% upside potential. Usually, this means a BUY recommendation among investment firms, or a recommendation to increase one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 63.0. This translates into 33% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 48.0. This suggests 1% upside potential. Even the most pessimistic analyst believes there will be stock growth. 

IRB-Brasil Resseguros S.A. provides reinsurance solutions in Brazil and internationally. It offers reinsurance solutions for aviation, engineering, civil liability, surety, rural risks, financial, oil and gas, property, casualty, agricultural, cargo and marine, life and pension, and miscellaneous. The company was founded in 1939 and is headquartered in Rio de Janeiro, Brazil.

Brazil

IRB-Brasil Resseguros S.A.

Financial Services

The company pays dividends irregularly. There have only been a few years with dividend payments in the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has barely been above zero and was substantially below that of its peers. On average, the company pays dividends annually. 

IRBR3.SA reported revenue of BRL 2 565mn in the last 12 months, down 37% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. Market expects EPS to reach BRL 4.43 in FY25.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). The stock has outperformed this peer group by 13ppts over past six months and grown 13ppts slower in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported good EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 81.2% in the last 12 months, up from -4.2% in FY23. 

Historically, IRBR3.SA has reported good net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 31.4%, a growth from -3.0% in FY23. 

IRB-Brasil Resseguros S.A. reported a return on equity (RoE) of 17.5% in the last 12 months, up from -2.9% in FY23. The market consensus projects an RoE of -7.7% in FY24, however, this time below its peers. 

Another important profitability metric, return on assets (RoA), amounted to 5.0% in the last 12 months, an increase from -0.8% in FY23. The market analysts predict that RoA will be -2.1% in FY24, though below its peers in this period. 

In the last 12 months, the return on capital employed (RoCE) grew to 5.1%, above the peers. The consensus estimate for FY24 for RoCE is -3.9%, however, this time below its peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.0 in the past several years. This ratio implies a fragile shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are close to minimal. In combination with rigorous business standards, shareholder rights are well protected.

IRBR3.SA has above average trading liquidity. The average private investor can sell his common position in the stock almost immediately. Liquidity is usually quite stable and remains extremely favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. The stock has a small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note robust profitability, solid return on capital, and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, slow historical revenue growth, excessive margin volatility, poor working capital management, inadequate interest coverage, and poor cash flow generation.

In highly turbulent market conditions, IRBR3.SA is exceptionally volatile. In other words, the stock will be among the worst-performers in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be critical. 

In normal market circumstances, IRBR3.SA is exceptionally volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change quite unpredictably. The stock's losses on its worst days (less than 1-5% of the time) will range from critical to immense. 

Based on key historical and expected multiples, the stock is slightly undervalued relative to its peers. In particular, the stock is underpriced on P/E, 'cheap' on EV/EBITDA, overvalued on P/FCF. 

IRB-Brasil Resseguros S.A.

R$ 47.48

3

IRB-Brasil Resseguros S.A.

R$ 47.48

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

R$ 47.48

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