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As part of our ongoing series here at The Acquirer’s Multiple, each week we focus on one of the stocks from our , and why it’s possibly a deeply undervalued gem.The Stock this week is:
Banco BBVA Argentina ()Banco BBVA Argentina S.A. (BBAR) is a prominent financial institution in Argentina, offering a comprehensive range of banking services to individuals and businesses. Established in 1886 as Banco Francés del Río de la Plata, it holds the distinction of being the country’s oldest private bank. In 1996, it became a subsidiary of Spain’s Banco Bilbao Vizcaya Argentaria (BBVA), enhancing its global reach.The bank operates through various segments, including retail banking, small and medium-sized enterprises (SMEs), and corporate and investment banking. Its services encompass checking and savings accounts, time deposits, credit cards, loans, mortgages, insurance, and investment products. With a nationwide presence, BBVA Argentina serves a diverse clientele, reinforcing its position as a leading financial entity in the region.A quick look at the share price history (below) over the past twelve months shows that the price is up 198.17%.(Click on image to enlarge)
Source: Google Finance
One of the metrics we use in our screens is IV/P (Intrinsic Value to Price). Let us simplify what it means:IV/P (Intrinsic Value to Price) tells you if a stock is a good deal or not based on how much value you’re getting for the price you pay. Here’s how it works:
- If IV/P is greater than 1, it means you’re getting more value than you’re paying for. For example, for every $1 you invest, you’re getting more than $1 of value. That’s a good deal!
- If IV/P is less than 1, it means you’re getting less value than you’re paying for. For example, for every $1 you invest, you’re getting less than $1 of value. That might not be a great deal.
- It’s a quick way to spot undervalued stocks (good deals).
- If IV/P is very low, like 0.6 (you’re only getting 60 cents of value for $1), it’s likely overpriced.
So, IV/P helps investors find stocks that are “cheap” based on how much value they give back. Higher is usually better!We currently have an IV/P of 29.60 for Banco BBVA Argentina SA, which means the stock’s Implied Value is calculated to be 29.6 times greater than its current price. In simpler terms:
Possible Reasons for This Undervaluation:
- Argentina has been experiencing economic challenges, including high inflation rates and currency instability.
- Such conditions can lead to reduced investor confidence, causing stock prices of Argentine companies to decline, potentially below their intrinsic values.
- Investors may be cautious about investing in Argentine markets due to political and economic uncertainties, leading to lower demand for stocks like Banco BBVA Argentina.
- Negative sentiment can result in stock prices not reflecting the company’s true financial health or growth prospects.
- Despite the challenging environment, Banco BBVA Argentina reported a net income of ARS 99.2 billion in the third quarter of 2024, a 224.8% increase compared to the same quarter in 2023.
- Strong financial performance amidst economic difficulties might not be immediately recognized by the market, leading to undervaluation.
- The depreciation of the Argentine peso can affect the valuation of companies operating in Argentina, especially when valuations are converted to stronger currencies.
- This can make the stock appear undervalued when assessed in foreign currency terms.
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