The average target price of LJQQ3.SA is 4.2 and suggests 52% 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 6.2. This translates into 125% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 2.8. This is equivalent to 0% downside potential in the worst case. 

Lojas Quero-Quero S.A. engages in the general retail trade activities in Brazil. It offers building materials, household appliances, and furniture. The company also provides credit card, extended warranties, and financial services. As of December 31, 2021, it operated approximately 465 stores in 377 cities. The company was founded in 1967 and is headquartered in Cachoeirinha, Brazil.

Brazil

Lojas Quero-Quero S.A.

Consumer Cyclical

The company tries to pay dividends regularly but only sometimes does so. It has paid dividends in roughly half the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are somewhat mixed. In the past 12 months, the dividend yield has been strong and significantly above its peers. At the same time, the average five-year yield has been significantly higher and exceeded most of its peers. On average, the company pays dividends annually. 

LJQQ3.SA reported revenue of BRL 2 666mn in the last 12 months, up 11% from FY23. The dynamics of cash flow, as measure by free cash flow (FCF), were rather similar. EPS fell 97% from FY23 to BRL 0.00. Market expects EPS to reach BRL -0.16 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 6ppts over past six months and grown 7ppts 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 modest EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 8.9% in the last 12 months, a decline from 9.9% in FY23. 

Historically, LJQQ3.SA has reported weak net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 0.0%, down from 0.8% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 0.0% in the last 12 months, a decrease from 0.6% in FY23. The market analysts predict that RoA will be 0.6% in FY24, again weaker than its peers. 

Lojas Quero-Quero S.A. reported a return on equity (RoE) of 0.0% in the last 12 months, down from 3.7% in FY23. The market consensus projects an RoE of 3.9% in FY24, again behind its peers. 

In the last 12 months, the return on capital employed (RoCE) declined to 0.0%, below the peers. The consensus estimate for FY24 for RoCE is 5.2%, again behind the 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.

LJQQ3.SA has average trading liquidity. The average private investor can sell his common position in the stock almost immediately. Liquidity is usually very 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 tiny market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. Among the negative credit factors, we point to weak positions in its industry, bleak profitability, negligible return on capital, poor working capital management, inadequate interest coverage, and an unfavourable capital structure.

In highly turbulent market conditions, LJQQ3.SA is as volatile as an index. In other words, the stock will move with the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be limited. 

In normal market circumstances, LJQQ3.SA is highly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change somewhat erratically. The stock's losses on its worst days (less than 1-5% of the time) will range from moderate to notable. We would also like to highlight the notable intraday volatility of the instrument. 

Considering past and projected metrics, the stock is neither 'expensive' nor 'cheap' compared to its peers. Specifically, the stock is 'expensive' on P/E, undervalued on EV/EBITDA, underpriced on P/FCF. 

Lojas Quero-Quero S.A.

R$ 2.7

4

Lojas Quero-Quero S.A.

R$ 2.7

4

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

R$ 2.7

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