On Friday, Barclays (LON:BARC) initiated coverage on FLSmidth & Co A/S (FLS:DC) (OTC: FLIDF) stock, a Danish engineering company, assigning an Underweight rating and setting a price target of DKK 315.00. The firm acknowledged the company's recent strides in adjusting its pricing strategy, streamlining its portfolio, and cutting costs, suggesting these self-help measures could further improve profit margins as the business simplification continues.
Despite these positive developments, Barclays expressed caution due to the absence of large projects in the Mining sector. The firm pointed out that while FLSmidth might see margin benefits from a greater service mix by 2025, potential headwinds from operating leverage could negate these improvements.
The analysis also highlighted concerns about FLSmidth's cash flow, predicting that the company could face challenges due to a higher net working capital (NWC) ratio, increased capital expenditures, reduced support from prepayments amid a likely decrease in order intake, elevated tax payments, and new lease obligations. These factors, according to Barclays, might place additional pressure on the company's free cash flow (FCF) generation for an extended period.
Barclays' price target of DKK 315 per share is based on various financial metrics projected for the years 2025 and 2026. These include an enterprise value to earnings before interest, taxes, and amortization (EV/EBITA) multiple of 9.3 times for 2025, a price-to-earnings (PE) ratio of 15.9 times for the same year, and a free cash flow yield of 0.8% for 2025, improving to 3.3% in 2026.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.