Gafisa has been severely punished by the market for its poor performance and failure to effectively execute its business strategy in what is a particularly challenging operating environment. Furthermore, there still a significant degree of risk for investors when the high level of leverage, low cash on hand and poor cash flow are taken into account.
Additionally, the outlook for Brazil's economy and housing market is quite poor, and neither are expected to recover in the short-term. All of these factors have contributed to the fact that the company is now trading at less than half of its book value per share. But with Gafisa trading at such a significant discount to its book value, combined with its growing sales and a stronger financial position, as well as the positive long-term outlook for the Brazilian housing sector, I believe that it presents as an opportunity for risk tolerant long-term investors.
"Santander said in a weekly outlook with a relatively empty economic calendar in the U.S. and Europe next week, and barring any "concrete and immediate actions, the market climate should remain tense."
In Brazil, the government is expected to announce a new stimulus package next week to prop up growth in the domestic economy, which has flagged so far this year.
"There's great expectation surrounding this action, especially regarding the reduction of federal taxes and charges for electricity," Santander said. "The bet is for this measure to generate a strong push for the economy in coming months."
Many of the top gainers on the Brazilian stock market Friday were among the biggest losers so far this year. Real-estate developer Gafisa (GFA, GFSA3.BR) led the way with a 14% gain to BRL2.88 but the stock remains down 30% since the end of 2011."