7 Best Portuguese Stocks To Buy

Best Portuguese Stocks To Buy: Portugal is the oldest nation state on the Iberian Peninsula and one of the oldest in Europe and, as such, has a rich and diverse culture and history.

There are more than 250 million Portuguese speakers around the world which attests to its linguistic influence. One of the founding members of NATO, and the Eurozone, Portugal is a developed country with a strong economy.

Here we talk in some detail about top 7 Portuguese companies and how you can potentially profit by investing in them.

Semapa Operates On 4 Continents

Semapa Sociedade de Investimento e Gestão SGPS, SA. [ENXTLS: SEM], or Semapa, is one of the biggest Portuguese industrial groups with interests in cement and derivatives, pulp and paper, and environmental services sectors.

The company is engaged in the production and sale of cellulose pulp and paper, cement, ready-mix concrete, hydraulic lime, as well as collection, storage, processing, and treatment of animal by-products.

The Company, through its subsidiaries, operates in four continents with a presence in Angola, France, Tunisia, Spain, and Poland among others. The company is listed on Euronext Lisbon stock exchange and is a constituent of the PSI 20 index.

Semapa Group [ENXTLS: SEM], in the first nine months of 2019 recorded a consolidated revenue of 1.6 billion euros, an increase of 2.8% over the same period in the previous year. Net profit attributable to Semapa shareholders stood at 112.1 million Euros, up by 14.9% in comparison to the corresponding period the previous year.

When it comes to Portugal, an interesting thing to note is that founders and/or their heirs partly control a majority of the top performing companies. Portuguese Family Business Association’s website reveals that family businesses, which account for 70% of all companies, account for around 60% of jobs, and 50% of Portugal’s GDP.

Moreover, a founder or a family member owns majority stake in around 50% of PSI 20 companies. The construction sector has been at the forefront of revitalizing Portugal’s economic recovery, supporting shares in companies including The Navigator Company and its parent company Semapa, majority-held by the Queiroz Pereira family.

Earnings over the next few years are expected to increase over 43%, indicating bright prospects for the company. The market is valuing the company low at the moment, which means it is the best time to accumulate Semapa’s shares.

Ramada Steel Serves Customers Globally

Ramada Investimentos e Industria, S.A., [RAMEUR: LN] formerly F Ramada Investimentos SGPS SA, is a Portugal-based holding company primarily engaged in the production and commercialization of steel products and storage systems in Portugal and internationally.

The company operates through three business segments:

• Steel,
• Storage Systems, and
• Real Estate.

It manufactures and sells steel for use in the construction of machines and components. The company also manufactures and sells steel wires.

The company’s Storage Systems segment deals with the manufacture and distribution of solutions for warehouse activities. In the Real Estate segment, the Company is involved in the management of its real estate properties, including rental of land for forest exploitation. Ramada serves customers worldwide.

During the first nine months of 2019, total revenues of Ramada Group [RAMEUR: LN] amounted to 86,966 thousand Euros, a downside of 11.6% in comparison to the same period last year. Total costs, excluding amortizations, financial results, and income taxes, amounting to 75,477 thousand Euros, witnessed a slide of a 9.6% decrease over September 2018.

During the first nine months of 2019, consolidated net profit amounted to 5,727 thousand Euros, significantly lower than 67,327 thousand Euros in the same period of 2018.

The reason for a steep decline in revenues and profit can be attributed to market uncertainties, intense supply pressure, and business difficulties due to market stagnation.

However, it is to be noted that Ramada Investimentos e Industria, S.A., is a rather small company. It has a market capitalization of 195 million Euros, which means it is not heavily influenced by market moves.

Its beta is below 1 which means its stock price has been somewhat delineated from broader market volatility, and more dependent on company-specific developments. This is a very important factor in current business environment where markets have been rapidly sliding owing to COVID-19 impact. As such, buying this stock could help you absorb the blow of overall market volatility in many portfolios.

A Rocky Road For Sonae Industria 

Sonae Indústria SGPS SA [SONI:  SI] is a Portugal-based company engaged in the manufacture of wood-based panels, laminates, and decorative products for application in the construction and interior design industries.

The company operates industrial plants and commercial facilities in more than half a dozen countries — Portugal, the United Kingdom, Canada, South Africa, Spain, France, Germany, Switzerland, and the Netherlands.

Sonae Indústria is present in North America through its subsidiary Tafisa Canada. The Company also owns Glunz AG, OSB Deustchland, and Aserraderos de Cuellar SA, among others.

Sonae Indústria SGPS SA [SONI. SI] has been going through extremely turbulent times. In the last 5 years, its stock price plunged a monstrous 99%. During the same period, its revenue shrank by 36% per year. And it’s not just long-term holders who are being brutalized, because the stock is down 53% since the last year.

Turnover in the first nine months of 2019 was 5.9 million Euros lower than in the same period of last year. It was primarily driven by a lower contribution from Sonae Arauco (-11.8 million Euros) affected by a reduction in total sales volumes and average selling prices and with lower sales in two of the regions where it operates (Germany and South Africa).

The company has been suffering owing to seasonal slowdown in its customers’ activity as well as the more difficult business environment in the main geographies where it operates.

Sonae Indústria hasn’t been paying dividends, but its total shareholder return (TSR) of -92% exceeds its share price return of -99%, indicating it has either spun-off a business, or raised capital at a discount, thereby providing additional value to shareholders.

Its performance in recent years may indicate unresolved challenges, but the management is determined to continue to push ahead with the execution of strategic plans to build a more competitive and sustainable business.

CTT – Correios Earnings Projected To Soar

CTT – Correios De Portugal, S.A., [CTT:  LS] is a Portugal-based company, which together with its subsidiaries, provides postal, financial, and courier services worldwide.

The company operates through Mail, Express & Parcels, Financial Services, and Banco CTT segments.

The Mail division, which contributes the majority of revenue, provides mail postal services.

The Express & Parcels division provides courier services, as well as urgent mail and parcel delivery under CTT Expresso.

The company provides financial services under PayShop brand name and through the Banco CTT subsidiary. The company operates in Portugal, Spain, and Mozambique.

CTT Correios [CTT:  LS] is a cheap defensive investment idea. Though its business of postal and courier services may not be too fashionable with favorable megatrends, its cash flow is robust and its balance sheet is healthy.

It is a financially sound company with good and secure dividend yield, and bright growth prospects. Investors looking for capital appreciation should definitely have Correios on their radar.

With its earning expected to grow by over 25% over the next couple of years, the company as a potential stock investment can truly deliver for the investors.

With a debt-to-equity ratio of 25%, the postal services provider finds itself in a strong position to take advantage of low-cost debt financing to expand its wings.

The stock is currently undervalued, which means it may be the right time for investors to buy into the stock to reap capital gains.

Mota Engil Operates In 25 Countries 

Mota Engil SGPS SA [MOTA: LS] is a Portugal-based company primarily engaged in construction and infrastructure management. The Company divides its business into three main segments: Engineering and Construction; Environment and Services; and Transport Concessions and Energy.

The company builds bridges, dams, highways, and roads. Its Environment and Services division deals with the management of solid urban and industrial waste, and its Transport division deals with management of motorways and expressways.

With a presence in over 25 countries, in three distinct geographical areas, namely Europe, Africa, and Latin America, Mota Engil is counted amongst the 30 largest European construction groups.

In the financial year 2019, Mota-Engil reached a turnover of 2.8 billion Euros (+ 2.2%) in a year in which the group saw profit rise 13% to 27 million Euros. Income before taxes, interest, depreciation, and amortization (EBITDA) stood at 420 million Euros, and the turnover reached 2,848 million Euros.

Mota-Engil’s revenues grew 2% in Europe to 880 million Euros and 11% in Africa to 1,007 million Euros. Latin America though bucked the trend, dropping 11% to 950 million Euros.

Mota-Engil plans to invest 200 to 250 million in “less cyclical businesses”, such as mining, A&S (Environment and Services), energy, and concessions, all of which the company thinks will generate stable cash flows and deliver higher profitability.

A high yield and a long history of paying dividends makes Mota-Engil an attractive option for income investors. Also, Mota-Engil shares are less expensive than other comparable stocks. But, Mota-Engil’s performance in recent times has been less impressive than that of the broader market.

However, that may change soon as the company recently won important construction contracts in Latin America. In another important development, China Communications Construction Co., is considering acquiring a 30% stake in Portuguese builder, which attests to the size and expertise of the company. CCCC, listed in Hong Kong and Shanghai, is involved in building transportation infrastructure like road, bridges, and ports.

Estoril Sol Is A Casino Magnate

Estoril Sol SGPS SA [ESON: LS] is a Portugal-based holding company which specializes in owning and operating casinos. The company is also engaged in the leisure and tourism sector.

The company operates three casinos located in Estoril, Lisbon, and Povoa. The company was founded on June 25, 1958 and is headquartered in Estoril, Portugal.

Casinos across the Portuguese landscape are turning in an impressive performance led by the country’s leading casino operator, Estoril-Sol [ESON: LS].

The sector reported annual turnover of just under 196.8 million Euros ($224.55m) in 2019. ESON has been performing well over the past 5 years, growing earnings by 40.2% per year. ESON is debt-free and its dividend yield of around 6% is pretty impressive as well.

The casino operator is trading below its fair value by more than 20%, which makes it a very strong investment case. Also, ESON is good value based on its PE Ratio (7.5x) compared to the Hospitality industry as well as the Portuguese market.

Also, Portugal’s economic growth in recent times has been impressive and the same is reflected in its equities, which is attracting investors from different parts of the globe.

Many smaller Portuguese listed companies that were under the radar are now gaining recognition and Estoril-Sol is one amongst them.

Experts believe that Portugal’s economic recovery, led by exports and tourism, will continue to lend support to shares of companies including casino operator Estoril Sol SGPS SA, which has been performing exceptionally well in recent times.

Teixeira Duarte

Teixeira Duarte SA [TDSA: LS] is a Portugal-based company primarily engaged in industrial and construction services, with operations in four continents.

The company’s activities are divided into seven business segments: Construction, Concessions & Services, Real Estate, Hospitality, Distribution, Energy, and Automobile. The company was founded by Ricardo Esquível Teixeira Duarte in 1921 and is headquartered in Porto Salvo, Oeiras, Portugal.

The earnings of Teixeira Duarte SA [TDSA: LS] have grown by over 75% over the past year. This is a highly positive development given that its earnings declined by -35.93% per year over the past 5 years. Net profit margins of 2.7% were also higher than last year at 1.4%.

The company exceeded the Portuguese Construction industry which returned -22.5% over the past year. However, the stocks underperformed the broader Portuguese market. Teixeira Duarte is good value based on its PE Ratio (2x) compared to the Construction industry average (9.9x).

The company has been grappling with issues in the past which is reflected in its earnings over the past 5 years.

However, the company seems to be on track with solid earnings growth in the past year. It has a high beta though, which means it has been fairly sensitive to market volatility. It means it is likely to rise when the market is booming and suffer in times of fear.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.