On Tuesday, UBS initiated coverage of CI&T Inc. (NYSE:CINT), a leading IT services provider in Latin America, with a Neutral rating and a price target of $4.20. CI&T, known for its focus on digital transformation, has demonstrated a robust revenue growth history, boasting a compound annual growth rate (CAGR) of 31% from 2018 to 2022.
However, the company experienced a marked slowdown in 2023, with a year-over-year increase of just 2%.
Looking ahead to 2024, UBS analysts project a strong V-shaped recovery in CI&T's revenue throughout the year. Despite this anticipated rebound, the firm’s forecast remains conservative, aligning with the lower end of the company's guidance at a slight decline of 1% year-over-year. This caution is attributed to the desire for greater visibility before adopting a more optimistic stance.
For the years 2025 and beyond, UBS foresees a significant revival in CI&T's revenue, predicting a 17% CAGR from 2024 to 2028. Additionally, the analysts expect improvements in the company's EBITDA margin, which is projected to rise from 18.1% in 2024 to 20.5% by 2026. This anticipated growth is attributed to CI&T's international expansion efforts.
Despite these positive forecasts, UBS suggests that the potential for a re-rating of CI&T's stock might be limited in the near term. The current price-to-earnings ratio for 2024 is estimated at 13.6 times, which is 8% below the company's historical average.
According to UBS, the market has already factored in the potential revenue and margin improvements, which contributes to the decision to maintain a Neutral rating on the stock at this time.
InvestingPro Insights
As CI&T Inc. (NYSE:CINT) navigates through a period of slower growth, InvestingPro data provides additional context for investors considering the company's future prospects. CI&T's market capitalization stands at $467.85 million, with a P/E ratio adjusted for the last twelve months as of Q4 2023 at 18.23, indicating a potential undervaluation relative to near-term earnings growth. Additionally, the company's PEG ratio for the same period is 0.52, which may suggest that the stock is undervalued based on expected growth rates.
InvestingPro Tips highlight that CI&T's management has been actively buying back shares, demonstrating confidence in the company's value. Moreover, the stock is trading at a low earnings multiple and near its 52-week low, presenting a potentially attractive entry point for investors. On the flip side, the stock has seen a significant decline over the last six months, with a price total return of -35.88% for that period. However, analysts predict the company will be profitable this year, with CI&T already profitable over the last twelve months.
For those looking to delve deeper into CI&T's financials and future outlook, InvestingPro offers additional insights and tips. With the use of coupon code PRONEWS24, investors can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, accessing a wealth of information that could inform their investment decisions. There are 14 additional InvestingPro Tips available for CI&T, which could provide a more nuanced understanding of the company's position and potential.
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