On Tuesday, Barclays upgraded Revvity Inc (NYSE: RVTY) stock from Equalweight to Overweight and increased the price target to $140 from the previous $125. The firm's analysis suggests that Revvity's shares are trading at a discount compared to its peers, despite the company's strong fundamental performance.
The analyst at Barclays highlighted that Revvity's current valuation is based on 19 times its expected EBITDA for the year 2025, which stands at $922 million. The expectation is that the company's valuation could adjust to a multiple between 21 and 23 times in the near term, aligning with the lower end of the valuation spectrum seen in its industry peers such as Agilent (NYSE:A) and Waters Corporation (NYSE:WAT).
According to Barclays, the potential for Revvity's stock arises from the possibility of closing the valuation gap with its closest fundamental comparator, TECH, which is currently trading at 26 times its EV/EBITDA. The optimism is based on the assumption that Revvity will continue to outperform the market and most of its peers in terms of core growth and profit margins.
The analyst emphasized the importance of Revvity's management continuing to execute against conservative targets, which provides a safety cushion against potential market demand declines. This strategy is seen as key to unlocking the company's margin potential.
The upgraded price target of $140 is now based on a 22 times multiple of the projected EBITDA for 2025, which Barclays estimates to be $933 million, compared to the previous valuation of 20 times a slightly higher EBITDA estimate of $942 million. This adjustment reflects the firm's confidence in Revvity's strong market performance and its ability to maintain an upward trajectory in its financial metrics.
In other recent news, Revvity Inc. has been making headlines with its robust financial performance in the second quarter of 2024. Despite a 1% dip in organic revenue, the company reported strong growth in its signal software and diagnostics divisions, an impressive 29% adjusted operating margin, and an adjusted earnings per share (EPS) of $1.22. This performance led to over $300 million in free cash flow and a $150 million gain from the divestiture of the PerkinElmer (NYSE:RVTY) Analytical & Enterprise Services business.
Analysts from TD Cowen, Baird, and BofA Securities have responded to these developments with increased price targets for Revvity, reflecting their confidence in the company's potential for growth and profitability. The revised estimates range from $127 to $141, with all firms maintaining either a Buy or Outperform rating on the stock.
Revvity's future plans include aggressive share repurchasing and a commitment to innovation, such as the introduction of new automated workflows and the integration of artificial intelligence in operations and product development.
InvestingPro Insights
Revvity Inc's recent upgrade by Barclays aligns with several key metrics and insights from InvestingPro. The company's market cap stands at $15.16 billion, with a P/E ratio of 89.36, reflecting the high valuation multiples mentioned in the Barclays analysis.
InvestingPro Tips highlight that Revvity is "Trading at a high earnings multiple" and "Trading at a high EBITDA valuation multiple," which corroborates Barclays' assessment of the company's valuation relative to its peers. The tip indicating that "Net income is expected to grow this year" supports the optimistic outlook on Revvity's financial performance.
Moreover, Revvity's strong market position is underscored by the fact that it's "Trading near 52-week high" and has "maintained dividend payments for 54 consecutive years," suggesting a history of consistent performance that may justify a premium valuation.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips, providing a deeper understanding of Revvity's financial health and market position.
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