Embraer SA

Embraer SA earns a 4-star quantitative star rating, indicating our belief that this share class offers a somewhat attractive opportunity for investors. The stock currently trades at a 13% discount to our quantitative fair value estimate of $86.28 per share; however, some caution is warranted due to this estimate's medium uncertainty rating.

The company's liquidity strengthens our estimated fair value. Adequate liquidity allows a company to meet short-term obligations, enhancing financial stability and reducing distress risk. Reflecting the firm's liquidity is its median trading volume over the past 60 days, which ranks in the top 20% globally. Trading volumes are high on shares, which may indicate increased institutional interest in stock ownership. We believe this is a sign that shares could be undervalued.

On a different note, the company's lack of profitability is potentially concerning. Companies with low profitability are often less resilient in recessions and are likely to generate weaker future cash flows for shareholders. The firm's enterprise value to free cash flow ratio of 58.8, a core component of profitability, falls in the top 20% compared with peers globally. This suggests limited cash flow is available for reinvestment or return to shareholders, which, despite our favorable price/fair value ratio, is a negative attribute.

The company's narrow economic moat rating suggests it should be able to maintain robust profitability for a decade or longer before competition erodes its advantage. In addition, the company's moderate financial health score is decent and doesn't seriously concern us with regard to financial distress.