Lavoro Limited operates as an agricultural inputs retailer. It sells agricultural inputs, including seeds, fertilizers and specialty products, crop protection products, and others for the agricultural industry. The company also produces specialty fertilizers, crop protection products, and biological crop inputs. It operates in Brazil, Colombia, and Uruguay. The company sells its products through its physical stores and digital. Lavoro Limited was founded in 2017 and is based in Sao Paulo, Brazil.

Brazil

Lavoro Limited

Basic Materials

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

LVRO reported revenue of BRL 9 392mn in the last 12 months, up 0% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 193% from FY23 to BRL -6.71. Market expects EPS to reach BRL -7.23 in FY25.

The stock has been falling steadily in the past six months, losing 48% in total. The stock has lagged its global peers from the same sector and industry (as shown above), underperforming then by 40ppts in total. 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 weak EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 4.3% in the last 12 months, a decline from 4.4% in FY24. 

Historically, LVRO has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled -10.4%, down from -8.1% in FY24. 

In the last 12 months, the return on capital employed (RoCE) declined to -56.0%, below the peers. The consensus estimate for FY25 for RoCE is 18.4%, however, this time ahead of the peers. 

Lavoro Limited reported a return on equity (RoE) of -108.5% in the last 12 months, down from -57.5% in FY24. The market consensus projects an RoE of -116.7% in FY25, again behind its peers. 

Another important profitability metric, return on assets (RoA), amounted to -10.4% in the last 12 months, a decrease from -7.8% in FY24. The market analysts predict that RoA will be -11.2% in FY25, again weaker than its peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been -0.9 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.

LVRO has very poor trading liquidity. It will take considerable time for the average private investor to sell a common position under normal market conditions. Liquidity is unstable and becomes extremely unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. 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 low margin volatility, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, slow historical revenue growth, bleak profitability, negligible return on capital, inadequate interest coverage, and an unfavourable capital structure.

In highly turbulent market conditions, LVRO 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, LVRO 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. 

Considering past and projected metrics, the stock is neither 'expensive' nor 'cheap' compared to its peers. In particular, the stock is of fair value on EV/EBITDA. 

Lavoro Limited

$ 2.41

2

Lavoro Limited

$ 2.41

2

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

$ 2.41

About

About

About

About