On Thursday, Stifel reiterated a Buy rating on Driven Brands (NASDAQ:DRVN) stock with a consistent price target of $20.00. The firm's analyst highlighted the company's ongoing strategy to optimize its car wash operations, which was initially presented during Driven Brands' Investor Day in September.
The company's plan involved halting growth investments, selling land acquired for future expansion, and restructuring costs at existing car washes to enhance margins.
The analyst noted that Driven Brands has made commendable progress in these areas, and their current estimates and target price are based on the expectation that this progress will continue.
With the company reaching the halfway mark to its decision-making point regarding further growth capital deployment, the analyst explored the possibility of Driven Brands divesting its car wash segment.
While the company has not indicated any plans for such a divestiture, the analysis suggests that parting with the car wash business could potentially lead to an improved profile in terms of growth, leverage, and cash flow, which might, in turn, elevate the stock price.
Driven Brands has not publicly announced any intentions to sell its car wash division. The analysis by Stifel presents a hypothetical scenario where the company would stand if it were to divest the segment. The focus of the analyst's commentary is on the potential benefits of such a move, though it remains speculative and not indicative of the company's actual plans.
The company's strategy, as outlined in September, has been aimed at improving operational efficiency and financial performance within its car wash business. The efforts to optimize this part of the business are part of a broader initiative to ensure that Driven Brands can continue to grow sustainably and generate value for its shareholders.
The reiteration of the Buy rating and the $20.00 price target by Stifel indicates confidence in Driven Brands' current strategy and performance. Investors will be watching closely as the company approaches the decision point referenced by the analyst, which will likely influence the company's investment strategies moving forward.
InvestingPro Insights
Driven Brands (NASDAQ:DRVN) has been under the lens of analysts and investors alike, as strategies for optimizing its car wash operations are underway. With a marked improvement in revenue growth, the last twelve months as of Q4 2023 show a 13.32% increase, reflecting the company's efforts in enhancing operational efficiency. The gross profit margin stands strong at 40.57%, indicating a robust control over costs relative to revenue.
Investors may find the recent price performance of DRVN shares particularly interesting. Despite a challenging year-over-year price total return of -45.13%, recent trends suggest a turnaround with a 15.41% increase over the past month and a 9.75% year-to-date price total return. This could be indicative of market confidence in the company's restructuring strategies and future prospects.
An InvestingPro Tip to consider is the company's fair value, which, based on analyst targets, stands at $18.00, while InvestingPro's own fair value assessment is slightly lower at $16.25. This suggests that the stock may be undervalued, offering a potential opportunity for investors. Additionally, with the next earnings date on the horizon, April 24, 2024, market participants will be keenly awaiting further insights into the company's financial health and strategic direction.
For those looking to delve deeper into Driven Brands' financial metrics and strategic outlook, InvestingPro offers additional tips and insights. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, where you can access a wealth of financial data and expert analysis to guide your investment decisions. There are 5 more InvestingPro Tips available for DRVN, each designed to provide investors with a comprehensive understanding of the company's performance and potential.
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