Cementos Pacasmayo

Cementos Pacasmayo SAA receives a 2-star quantitative star rating, indicating our belief that this share class is a somewhat unattractive choice, and investors should look elsewhere for more fruitful opportunities. The stock currently trades at a 7% premium over our quantitative fair value estimate of $11.46 per share; however, this estimate should be taken with a pinch of salt due to its high uncertainty rating. We require the price/fair value ratio to move a certain amount before the star rating can change. This stability-enhancing buffer is in effect for this stock.

The firm's liquidity undermines our fair value estimate. Low liquidity can inhibit a company from meeting short-term obligations, potentially reducing financial stability and increasing distress risk. Reflecting the firm's liquidity is its median trading volume over the past 60 days, which lies in the bottom 30% compared with peers globally. Relatively low trading volume for these shares could lead to prices that don't accurately reflect the intrinsic value of shares. We believe this is a sign that shares could be overvalued.

Conversely, the company's favorable dividend structure is reassuring. Dividends represent a stable form of future cash flows returned to shareholders, reducing the perceived risk of a business. The firm's forward dividend yield of 4.9%, for example, lies in the top 20% globally. Expected dividend payments over the coming year relative to the current share price are favorable, which, despite our unfavorable price/fair value ratio, is a positive attribute.

In addition to the aforementioned drivers, our model considers momentum as part of its comprehensive analysis. This share class has outperformed the broader universe over the past year. This outperformance may signify a bull trap, in light of other detractors from our model.

The company's quantitative economic moat rating of none suggests any excess returns could erode quickly as competition arrives. Additionally, the firm's moderate financial health score suggests it is acceptably positioned against adverse economic circumstances.