On Friday, Stifel, a financial services firm, raised its price target for Latham Group Inc. (NASDAQ: SWIM) shares to $6.80, up from the previous $4.75, while maintaining a Buy rating on the stock. The firm's analyst cited the company's robust position in the pool construction industry, particularly in fiberglass manufacturing, as a reason for the increased price target.
Latham Group's revenue, according to Stifel, is significantly driven by new pool construction, which accounts for over 60% of its business. The analyst believes that the current market undervalues the company's potential to benefit from the growth in the pool category, especially given a more normalized business environment.
The firm expressed confidence in Latham Group's ability to navigate through the anticipated revenue and EBITDA declines, which have previously affected investor sentiment. Stifel's outlook includes a conservative view for fiscal year 2024 but anticipates a revenue performance in fiscal years 2025 and 2026 that aligns with their pool category projections.
Stifel's analysis suggests that there is potential for upside from increased fiberglass penetration and market share gains. The firm expects that as Latham Group reaches its trough earnings in fiscal year 2024 and moves towards a more normalized setting in fiscal year 2025, investor enthusiasm for the company's growth prospects and strengthening market position will grow.
In other recent news, Latham Group has announced its Q2 2024 results, showing a 9.6% decrease in net sales, yet a substantial increase in adjusted EBITDA margin by 400 basis points. The company attributes these results to effective restructuring and cost management strategies, as well as lower raw material costs. The acquisition of Coverstar Central is expected to enhance sales of automatic safety covers and improve margins, despite an anticipated 15% decline in new pool starts.
Latham Group's net income rose to $5.4 million, a significant improvement from a loss in the previous year. The company has adjusted its full-year EBITDA guidance upwards by $15 million. The acquisition of Coverstar Central is expected to contribute $20 million in net sales and provide a 140 basis point margin benefit.
These are the recent developments for Latham Group, which continues to lead in the fiberglass pool market and maintains a strong financial position with $90.8 million in cash and $282.4 million in total debt. The company remains focused on cost management and is exploring further mergers and acquisitions.
InvestingPro Insights
As Stifel raises its price target for Latham Group Inc. (NASDAQ: SWIM), a closer look at key financial metrics and market sentiment via InvestingPro provides additional context. With a market capitalization of approximately $720 million, Latham Group is trading at a high P/E ratio of 61.47, which indicates investor confidence in future earnings growth despite a revenue decline of nearly 14.66% in the last twelve months as of Q2 2024.
InvestingPro Tips suggest that the net income for Latham Group is expected to grow this year, and with six analysts revising their earnings upwards for the upcoming period, there is a sentiment of optimism surrounding the company's financial performance. Moreover, the stock's price volatility is noted as high, which might attract traders looking for short-term gains.
For readers interested in a deeper analysis, InvestingPro offers additional insights, including a fair value estimation and a comprehensive list of financial metrics. There are 15 more InvestingPro Tips available for Latham Group that provide further data points and investment considerations, accessible at https://www.investing.com/pro/SWIM.
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