On Thursday, Northcoast Research initiated coverage on shares of Tennant Company (NYSE:TNC), a global leader in designing, manufacturing, and marketing solutions that help create a cleaner, safer, healthier world.
The firm has issued a Buy rating on the stock, accompanied by a price target of $125.00. Currently trading at $80.58, the stock sits near its 52-week low of $80.03, while InvestingPro analysis suggests the stock is undervalued based on its proprietary Fair Value calculations.
The analyst from Northcoast Research highlighted Tennant's strong positioning for earnings growth, a robust balance sheet, and solid cash flow as key factors supporting the positive outlook. This assessment aligns with the company's strong financial metrics, including a healthy current ratio of 2.17 and moderate debt levels. As the company moves into 2025, these strengths are anticipated to further accelerate into 2026.
Tennant Company has a history of trading within a next-twelve-month (NTM) price-to-earnings (P/E) ratio range of 12 to 26 times. The current P/E ratio stands at 14.21x, which Northcoast deems attractive. This valuation comes in the lower end of the historical P/E range, suggesting a potential undervaluation of the stock.
Notably, InvestingPro data reveals the company has maintained dividend payments for 54 consecutive years, with 32 years of consecutive increases, demonstrating remarkable financial stability.
The analyst also noted Tennant's potential to consolidate market share within a fragmented global market, presenting a compelling investment opportunity. The company's strategic positioning and financial health are expected to drive its performance in the coming years.
Investors and market watchers will be keeping an eye on Tennant's performance as it works to justify the confidence placed in its stock by Northcoast Research's initiation. With a Buy rating and a notable price target set, Tennant Company's stock may draw increased attention on the New York Stock Exchange.
In other recent news, Tennant Company reported a 3.6% increase in net sales, reaching $315.8 million for the third quarter of 2024. The company's adjusted EBITDA rose to $47.9 million, marking a 15.2% margin, while adjusted net income saw a 4.7% growth to $26.6 million.
Despite a lower GAAP net income compared to the previous year, Tennant Company continues to drive growth through strategic initiatives, including new product launches and an ongoing ERP modernization project.
The company also announced a 5.4% dividend increase, demonstrating the 53rd consecutive year of dividend growth. Tennant Company reaffirmed its 2024 guidance for net sales of $1.28 billion to $1.305 billion. Adjusted EPS is projected to be between $6.15 and $6.55, and adjusted EBITDA is expected to range between $205 million and $215 million.
These recent developments highlight the company's resilience amid challenges. Analysts, however, have noted potential impacts on performance due to backlog challenges. Despite these potential hurdles, the company anticipates continued order growth into 2025, bolstered by strong performance in the Americas and promising growth in the Autonomous Mobile Robots (AMR) segment.
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