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Time To Book Profits on This Small-Cap Financials Stock - VINP

Jan 24, 2022 | Team Kalkine
Time To Book Profits on This Small-Cap Financials Stock - VINP

Vinci Partners Investments Ltd. (NASDAQ: VINP) is a Brazil-based investment management company. The firm is engaged in asset and wealth management, offering a range of investment products and solutions across different strategies, such as private and public equities, real estate, credit, infrastructure and hedge funds, among others.

Why should investor’s book a profit?

  • Declining margin: EBITDA margin has decreased from 71.3% in the quarter ended December 31, 2019, to 56.2% in the quarter ended September 30, 2021. The operating margin has fallen from 67.2% to 53.3% in the same period, and the net margin has decreased from 57.5% to 41.7%.

Source: REFINITIV, Analysis by Kalkine Group

  • Increasing uncertainties over the global financial market: The market is concerned that the Federal Reserve (FED) will raise interest rates significantly this year. Investors anticipate the upcoming FED policy meeting to learn more about how the Fed intends to battle inflation. Rising interest rates have worried investors because they raise borrowing costs, impacting global economic prospects and corporate earnings forecasts.
  • Stock trading in an overbought zone: At the last closing, VINP shares have registered a crossover above Upper Bollinger Band, and the leading momentum indicator 14-day RSI is hovering in an overbought zone of 73.87. It indicates that stock might consolidate from the current trading levels.

Technical price chart (as of January 21, 2022). Source: REFINITIV, Analysis by Kalkine Group

Valuation methodology (illustrative): Price to Earnings- based valuation

Analysis by Kalkine Group

Note: Premium (discount) is based on our assessment of the company’s growth drivers, economic moat, competitive advantage, stock’s current, and historical multiple against peer group average/median and investment risks.

Stock recommendation

Yields on the government bonds across the developed world hit fresh highs amid further evidence that inflation is rising faster and staying around for longer than central banks had expected last year. This will increase concern that the FED will aggressively move to raise rates this year is taking a toll on the market. Companies dealing in asset management and wealth management could witness large volatilities if selling pressure increases in equities and other speculative asset classes like Crypto. Hence, given the heightened uncertainties over the global financial market and current valuation, we recommend a “Sell” rating on the stock at the closing price of USD 13.12 (as of January 21, 2022).

1-Year price chart (as of January 21, 2022). Source: REFINITIV, Analysis by Kalkine Group

* The reference data in this report has been partly sourced from REFINITIV.