On Friday, Jefferies made a revision to its rating on SSE Plc. (LON:SSE:LN) (OTC: SSEZY), downgrading the stock from "Buy" to "Hold," while maintaining a price target of £20.50.
The change in stance comes after SSE's first-half fiscal year 2025 trading update, prompting Jefferies to release its estimates for the same period. The earnings per share (EPS) estimate provided by Jefferies aligns with the guidance offered by SSE.
The firm's forecasts for the fiscal years 2025 to 2027 remain largely unaltered and are consistent with the consensus. SSE's shares have experienced a significant increase since February, which has led to a reassessment of the stock's value. According to Jefferies, the stock's current valuation reflects a more balanced risk-reward scenario.
The unchanged price target of 2,050 pence (or £20.50) set by Jefferies comes at a time when SSE's stock is trading at 10 times its fiscal year 2026 enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA). This valuation is reportedly in line with that of SSE's industry peers.
SSE, a company known for its energy operations, has been under scrutiny by investors as the energy sector faces various market dynamics. The revision in rating by Jefferies indicates a shift in the perceived investment potential of SSE's shares in the near term.
InvestingPro Insights
To complement Jefferies' analysis, InvestingPro data offers additional insights into SSE Plc's financial position. The company's P/E ratio stands at 12.03, which aligns with Jefferies' observation of a balanced valuation. This is further supported by an InvestingPro Tip indicating that SSE is "trading at a low earnings multiple."
Despite the downgrade, SSE's financial health appears robust. The company boasts a strong dividend track record, having "maintained dividend payments for 33 consecutive years," according to an InvestingPro Tip. This consistency is reflected in the current dividend yield of 3.88%, which may appeal to income-focused investors.
SSE's profitability is also noteworthy, with an operating income margin of 27.88% for the last twelve months as of Q4 2024. This solid performance is reinforced by another InvestingPro Tip stating that "analysts predict the company will be profitable this year."
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips on SSE, providing a deeper understanding of the company's financial position and market performance.
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