BMO Capital Markets has updated its outlook on Fairfax Financial Holdings (FFH: CN) (OTC: OTC:FRFHF), increasing the price target to C$1,850 from the previous C$1,800.
The firm continues to recommend an Outperform rating for the stock.
The adjustment follows Fairfax's impressive performance in the second quarter of 2024, where the company reported earnings per share (EPS) of US $37.18, significantly surpassing both BMO Capital's projection and the consensus estimate of US$13.17 and US$30.06, respectively.
The strong quarterly outcome was attributed to several factors, including improved underwriting income, better investment gains, higher interest and dividend income, stronger earnings from associates and non-insurance companies, as well as an improved top line.
The new price target reflects a multiple of 1.25 times the projected book value per share (BVPS) for the second quarter of 2025.
BMO Capital's assessment suggests that Fairfax Financial's expected 10.5% operating return on equity (ROE) in 2025 should command a multiple more than 40% higher than its current trading value, which stands at 1.1 times.
This projection is based on a price-to-book (P/B) versus ROE regression analysis.
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