Tuesday, investment firm DA Davidson commenced coverage on Miller Industries (NYSE:MLR), the tow truck market leader, with a positive outlook. The firm issued a Buy rating and set a price target of $82.00 for the company's stock. Miller Industries, recognized as the original inventor of the tow truck, has achieved significant growth, with sales surpassing $1.2 billion, reflecting a compound annual growth rate (CAGR) of approximately 14% over the last quarter-century.
DA Davidson highlighted the company's strong performance, attributing it to various factors such as the increasing number of vehicles on the road, denser urban populations, more vehicular travel, and a rise in repossessions due to missed car payments. These elements have contributed to Miller Industries' expansion and have helped the company maintain its market leadership position.
Despite the impressive historical growth rate, DA Davidson does not project the same level of growth moving forward. However, the firm emphasizes Miller Industries' robust free cash flow (FCF) yield, which exceeds 10%. This indicator suggests that the company represents a valuable opportunity for Growth at a Reasonable Price (GARP) investors, looking for companies with strong growth prospects and reasonable valuations.
The analyst's remarks underline Miller Industries' overlooked status in the market, noting that the company has not been covered by sell-side analysts for decades and has not been significantly in the spotlight among investors. The firm's initiation of coverage could bring renewed attention to the stock.
In conclusion, DA Davidson's initiation of coverage on Miller Industries with a Buy rating and a price target of $82.00 reflects the firm's confidence in the company's continued growth and its potential as a stable investment within the Machinery sector.
In other recent news, Miller Industries has announced impressive Q2 2024 results, with a substantial increase in both revenue and profit compared to the same period last year. The company's revenue surged to $371.5 million, marking a 23.7% increase year-over-year, while gross profit climbed to $51.1 million, a 27.9% rise from Q2 2023. These positive results are attributed to consistent demand, increased production volume, and a higher number of OEM chassis deliveries.
In further developments, the company has adjusted its revenue guidance, now anticipating low double-digit growth for the full year of 2024. Additionally, Miller Industries is focusing on converting revenue into cash to fund continued growth and strengthen the balance sheet.
Despite the positive performance, the company reported a slight increase in the effective tax rate year-over-year and higher interest expenses due to increased debt levels and distributor floor plan financing costs. However, the international business remains strong, accounting for approximately 10% of total sales, with robust customer demand.
According to analysts, the company's second-quarter performance demonstrates its ability to leverage increased production and deliveries to drive profitability. They also note that Miller Industries is well-positioned to continue its growth trajectory.
InvestingPro Insights
Recent data from InvestingPro adds depth to DA Davidson's positive outlook on Miller Industries (NYSE:MLR). The company's P/E ratio of 9.55 and PEG ratio of 0.11 for the last twelve months as of Q2 2024 support the notion that MLR may be undervalued, aligning with the analyst's view of the stock as a GARP opportunity. This is further reinforced by an InvestingPro Tip indicating that MLR is trading at a low P/E ratio relative to near-term earnings growth.
The company's financial health appears robust, with revenue growth of 27.44% over the last twelve months as of Q2 2024, and an impressive EBITDA growth of 66.8% over the same period. These figures underscore the strong performance mentioned in the article. Additionally, an InvestingPro Tip highlights that MLR has maintained dividend payments for 15 consecutive years, suggesting financial stability and a commitment to shareholder returns.
While the article notes Miller Industries' historical growth, InvestingPro data shows a current market cap of $688.6 million, indicating potential for further expansion. The InvestingPro Fair Value of $73.49 aligns closely with DA Davidson's price target, providing additional support for the bullish stance.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Miller Industries, which could provide further insights into the company's investment potential.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.