On Tuesday, D.A. Davidson maintained a Neutral stance on Broadridge Financial (NYSE: BR), with a continued price target of $185.00. Broadridge Financial Solutions (NYSE:BR), Inc. has been included in D.A. Davidson’s Best-of-Breed Bison initiative, which seeks to spotlight top-tier companies with strong market positions and outstanding financial metrics.
The initiative evaluates companies against a set of 12 characteristics, and Broadridge has met 11 of these, showcasing its robust competitive standing and financial health. The research team at D.A. Davidson believes that Broadridge's alignment with these factors substantiates its inclusion on the list.
Despite the recognition, the firm has opted to retain its Neutral rating on the stock, with a valuation based on an enterprise value of just over 14 times their projected calendar 2025 adjusted EBITDA of $1.78 billion. This valuation is in line with the company's historical average EBITDA multiple, which has ranged from approximately 14 to 14.5 times over the past decade.
Currently, Broadridge's shares are trading at an enterprise value of around 17 times the forecasted 2025 EBITDA, which does not present a significant discount to its intrinsic value. This assessment aligns with D.A. Davidson's criteria for the Best-of-Breed Bison initiative, which emphasizes investment opportunities that are notably undervalued.
The firm's analysis suggests that while Broadridge's market valuation is not seen as unreasonable, it does not fully meet the Best-of-Breed Bison framework's requirement for a substantial discount to intrinsic value. This has influenced the decision to maintain the current rating and price target for Broadridge Financial.
In other recent news, Broadridge Financial Solutions is witnessing noteworthy changes in its leadership and financial growth. The company announced that CFO Edmund Reese will depart by the end of June, with Ashima Ghei, current CFO of Broadridge's Investor Communication Solutions segment, stepping in as Interim CFO. During Reese's tenure, Broadridge experienced a 38% increase in market capitalization to $24 billion, highlighting significant growth in annualized recurring revenue and Adjusted EPS.
In terms of financial performance, Broadridge's Q3 fiscal year 2024 results revealed a 4% rise in recurring revenue and a 9% boost in adjusted earnings per share (EPS). Despite timing challenges with annual meetings, the company affirmed its full-year financial objectives, including a 100% free cash flow conversion.
The company is actively allocating capital through share repurchases and mergers and acquisitions, indicating a strategic focus on growth.
InvestingPro Insights
Looking at the latest metrics from InvestingPro, Broadridge Financial (NYSE: BR) presents a mixed financial picture. With a market capitalization of $23.26 billion and a P/E ratio standing at 33.13, the company trades at a high earnings multiple, which aligns with D.A. Davidson's view of the stock not being significantly undervalued. The P/E ratio has remained fairly consistent, with a slight increase to 33.28 over the last twelve months as of Q3 2024.
Despite some analysts revising their earnings downwards for the upcoming period, Broadridge has demonstrated a commitment to returning value to shareholders, raising its dividend for 17 consecutive years, with a recent dividend growth of 10.34%. This consistent dividend payment history is a testament to the company's financial resilience and operational efficiency.
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