Brembo SpA : Marginally overvalued, maybe a Safety?

Brembo SpA relative valuation is now OVERVALUED. It was previously rated UNDERVALUED, and has a fundamental analysis score of 86.

Our analysis is based on comparing Brembo SpA with the following peers – Sogefi SPA, Landi Renzo S.p.a. and Piaggio & C. S.p.a. (SO-IT, LR-IT and PIA-IT).

Relative Valuation

Brembo SpA’s price of EUR 68.60 is greater than CapitalCube’s implied price of EUR 59.29. At this level, CapitalCube believes that Brembo SpA is overvalued. Over the last 52 week period, the stock has fluctuated between EUR 43.10 and EUR 68.75.

Relative Valuation

Company Overview

  • With respect to peers, relative outperformance over the last year is in contrast to the more recent underperformance.
  • It currently trades at a Price/Book ratio of (5.19).
  • We classify BRE-IT as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • BRE-IT has a successful operating model with relatively high net profit margins and asset turns.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • BRE-IT‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • While BRE-IT‘s revenue growth in recent years has been above the peer median, the stock’s P/E ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.
  • The company’s level of capital investment seems appropriate to support the company’s growth.

Investment Outlook

Brembo SpA has a fundamental score of 86 and has a relative valuation of OVERVALUED.

Brembo SpA appears on the top right hand quadrant of CapitalCube’s Value – Price Matrix. We classify this as ‘Safety’. In other words, Brembo SpA has a relatively high Fundamental Analysis score of 86, while being potentially overvalued and trading higher than its CapitalCube Implied Price of 59.29. There might be some safety in this stock where it’s fundamental strength perhaps justifies its relatively higher price.

Fundamentals Vs Relative Valuation

Quadrant label definitions. Hover to know more

Safety, Value Play, Value Trap, Speculative

Drivers of Valuation

BRE-IT has a Harvesting profile relative to its peers.

We classify BRE-IT as Harvesting because of the market’s low expectations of growth (P/E of 19.04 compared to peer median of 46.74) despite its relatively high returns (ROE of 30.66% compared to the peer median ROE of 4.18%).

The company currently trades at a Price/Book ratio of 5.19.

Valuation Drivers

Quadrant label definitions. Hover to know more

Outperforming, Harvesting, Challenged, Turnaround

BRE-IT has maintained its Harvesting profile from the prior year-end.

ROE % (On Common Equity)
Price To Earnings

Peer Analysis

A complete list of valuation metrics is available on the company page.

Company Profile

Brembo SpA engages in the manufacture and provision of braking system solutions for automotive vehicles. It operates through the Discs and After Market business segments. The Discs segment comprises the systems and motorbikes. The After Market segment refers to the performance of the group. The company was founded by Emilio Bombassei and Italo Breda on January 11, 1961 and is headquartered in Curno, Italy.

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