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Looking for a dirt cheap Brazilian stock? Gafisa SA (GFA - Snapshot Report), one of Brazil's largest homebuilders, is on sale as shares have slid 50% in the last 52-weeks as investors have fled emerging market stocks. This Zacks #2 Rank (buy) is now trading at just 6.9x forward estimates.

Gafisa has built more than 1000 developments and constructed over 12 million square meters of housing in Brazil in the last 56 years.

Gafisa serves a wide market of buyers, including the rapidly growing lower income housing segment through its majority ownership stake in Construtora Tenda, S.A. ("Tenda") and the higher income segment in Alphaville.

Mid-to-Higher Income Segment Soared in Q1

On May 9, Gafisa reported its first quarter results and missed on the Zacks Consensus Estimate. Earnings per share were just 4 cents compared to the consensus of 35 cents. It was the first miss in 3 quarters.

Margins were affected by lower margin Gafisa product and legacy Tenda developments, which is the lower income segment. The company expects to finally clear out that inventory by the second half of the year.

However, some of its metrics saw improvement in the quarter. Alphaville launches, which is its mid-to-higher income segment, rose 87% to R$ 182 million from the first quarter of 2010.

The revenue backlog also rose 38% to R$ 4.1 billion compared with the first quarter of 2010 which is a good sign going forward.

Outlook for 2011

The company expected some of the same factors that impacted its first quarter to do so in the second, including the lower margins on some of the older Tenda developments. But in the second half of the year, it is forecasting further improvement.

Gafisa expects consumer demand to remain strong as Brazil is in the midst of a big growth cycle.

Zacks Consensus Estimates Rise

Despite the earnings miss in the first quarter, analysts are still bullish on 2011 and 2012.

The 2011 Zacks Consensus Estimates is up 6 cents to $1.36 in the last 2 months. This is earnings growth of 17%.

Analysts expect another 17% earnings growth in 2012, as the Zacks Consensus rose 19 cents to $1.59 over the prior 60 days.

The second quarter results, due Aug 10, will be key to the full year earnings. Be on the watch for that report.

Shares Sell Off Big- Is This An Opportunity?

It hasn't been fun to be an investor in Gafisa in recent months. Shares are off about 50% from the 52-week highs.

But that sell-off has created an opportunity.

Shares Are Cheap

With a forward P/E of 6.9, that is fast approaching the cheapness level the shares reached in 2008 and 2009, at the height of the financial crisis, when it traded between 4x and 5x forward estimates.

The company also is cheap by other metrics.

Its price-to-book ratio is just 0.9, which is well under the 3.0 cut-off I use to determine value.

Gafisa also has a price-to-sales ratio of 0.96. A P/S ratio under 1.0 usually indicates a company is undervalued.

As an added bonus on top of being cheap, the company also has a solid 1-year return on equity (ROE) of 10%.

With shares down big, but estimates holding up and double digit growth still expected in 2011, Gafisa is an intriguing emerging market value stock.

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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.

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