The average target price of MTRE3.SA is 5.6 and suggests 53% 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 7.0. This translates into 93% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 4.8. This suggests 32% upside potential. Even the most pessimistic analyst believes there will be stock growth. 

Mitre Realty Empreendimentos e Participações S.A. engages in the development, construction, and sale of residential and commercial real estate properties. The company is based in Sao Paulo, Brazil.

Brazil

Mitre Realty Empreendimentos e Participações S.A.

Real Estate

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, and there is a clear trend. In the past 12 months, the dividend yield has been outstanding and can be rated excellent compared to its peers. At the same time, the average five-year yield has been significantly higher and exceeded nearly all its peers. The company distributes nearly all its profit as dividends (payout ratio above 90%, a negative factor). It will not be easy to sustain such an extreme payout ratio. It may also indicate a company's lack of profitable growth opportunities, which suggests doubtful prospects. On average, the company pays dividends quarterly. 

MTRE3.SA reported revenue of BRL 1 176mn in the last 12 months, up 25% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 100% from FY23 to BRL 0.00. Market expects EPS to reach BRL 0.72 in FY25.

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Over the past six months the stock has exceeded the performance of this peer group by 7ppts and its growth accelerated by 13ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is mildly favourable.

The company has reported modest EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 9.6% in the last 12 months, up from 7.4% in FY23. 

Historically, MTRE3.SA has reported modest net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 4.2%, down from 9.6% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to 3.3%, below the peers. The consensus estimate for FY24 for RoCE is 4.9%, again behind the peers. 

Mitre Realty Empreendimentos e Participações S.A. reported a return on equity (RoE) of 4.9% in the last 12 months, down from 9.1% in FY23. The market consensus projects an RoE of 13.1% in FY24, this time above its peers. 

Another important profitability metric, return on assets (RoA), amounted to 2.3% in the last 12 months, a decrease from 4.3% in FY23. The market analysts predict that RoA will be 4.9% in FY24, more robust than its peers in this period. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.9 in the past several years. This ratio implies a good 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.

MTRE3.SA has poor trading liquidity. The average private investor can sell his common position in the stock in a single trading day under normal market conditions. Liquidity is usually quite stable and remains 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. We note resilient historical revenue growth, adequate interest coverage, and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, bleak profitability, negligible return on capital, poor working capital management, weak debt servicing capacity, and poor cash flow generation.

In highly turbulent market conditions, MTRE3.SA is highly volatile. In other words, the stock will fall substantially more than 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 significant. 

In normal market circumstances, MTRE3.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 significant to substantial. 

From both historical and forecast perspectives, the stock is considerably underpriced compared to similar stocks. In particular, the stock is underpriced on P/E, 'cheap' on EV/EBITD. 

Mitre Realty Empreendimentos e Participações S.A.

R$ 3.63

5

Mitre Realty Empreendimentos e Participações S.A.

R$ 3.63

5

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

R$ 3.63

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