On Wednesday, BofA Securities revised its stance on Signify NV (LIGHT:NV) (OTC: SFFYF), promoting the stock from Neutral to Buy with an increased price target of €29.00, up from the previous €25.00. R
actliffe highlights that Signify's shares are currently trading just marginally above their 2016 spin-off value, noting a roughly 30% discount to the historical enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) average of 8x. She believes that the company's growth and margin prospects are now more promising than they were at the time of the spin-off.
The upgrade comes with a positive outlook on the company's future financial performance. Ractliffe's estimates for Signify's earnings before interest, taxes, and amortization (EBITA) for the fiscal years 2025 and 2026 are 8-9% higher than the current consensus. She anticipates that the organic growth inflection, aided by the recovery of the construction market, will lead to a re-evaluation of the company's stock.
The analyst's optimism is further supported by the expected benefits from a cost savings program that Signify announced earlier in the year. These savings, along with sustained gross margin strength and operating leverage, contribute to the revised adjusted EBITA estimates for 2025 and 2026, which are up by 8-9%.
Ractliffe's price objective is derived from a 7.2x multiple on the projected 2025 EV/EBITA, which is about a 10% discount to the historical average multiple. Despite this discount, which reflects the speed of the growth recovery, she sees more than a 30% upside potential in Signify's shares. The analyst's evaluation suggests confidence in the company's performance and trajectory in the upcoming years.
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