One of the aspects that fascinates me most is analyzing OPAs (Public Acquisition Offers).
Why do I have this interest? Because when a company decides to acquire its own shares, it suggests that the company recognizes value where the market has not yet realized it.
This dynamic occurs essentially because the controlling shareholders believe in the company's promising horizons, indicating that it is still undervalued. This motivates them to invest in the company early, ahead of the market. It is worth mentioning that the market only exists due to the intricate system that propagates information in a non-uniform way among users.
How did I come across Eucatex?
I came to this company while studying potential opportunities for my investments . Honestly, I'm not a big fan of cyclical companies , mainly due to my difficulty in dealing with downturns, especially when many clients check their investment statements every hour, transferring part of their impatience to me. In fact, what captured my attention in the case of Eucatex was the company's ability to sustain a remarkably high level of sales, even in the face of reduced consumer liquidity.
In my research through the news, I came across an article in a large circulation newspaper. It mentioned that the company's target price for this OPA would be in the range of R$12.75 to R$14.00. The question arises: would this be a fair price ?
To start, in the reports I identified that the company has an EBITDA of R$5 per share . With an interest expense of R$0.75 per share and an average CAPEX of R$2.00 per share, an adjusted cash flow of R$2.25 per share remains. When considering the value of the common share , set at R$15 per share, we obtain a cash flow multiple of 6.67. A not inconsiderable assessment for a company that maintains double-digit growth in both its sales volume and profit.
Examining the bottom line of the balance sheet , we note years of considerable challenge, as in the cases of 2014 and 2015. However, there has never been a single year of loss for Eucatex . Surprisingly, the share price appears inert relative to its performance. Even with the company raising its standards in terms of sales and profit , the shares did not follow the same trajectory, remaining, tediously, linked to pre-pandemic levels. Given this, I come to the conclusion that either the controlling partners are aware of what they are doing, or, like their actions, they may have become bored with the market.
What is the fair share price?
Contact Wagner Geremia.