On Thursday, Barclays (LON:BARC) initiated coverage on GEA Group AG (G1A:GR) (OTC: GEAGY) with an Overweight rating and set a price target of EUR 51.00 per share. The firm believes that GEA Group presents an investment opportunity that depends more on the company's internal initiatives rather than macroeconomic factors. The new CEO, who assumed the role in 2019, is credited with steering the company effectively.
Barclays' analysis suggests that while near-term earnings revisions for GEA Group may be limited, there is potential for upside in the longer term. The consensus among analysts does not currently anticipate significant margin expansion for the company. However, Barclays foresees an opportunity for growth in the coming years.
The financial institution points out that GEA Group is generating mid-single-digit percentage cash returns and is trading at what is considered an undemanding valuation. The current valuation is 12 times the estimated 2026 enterprise value to earnings before interest and taxes (EV/EBIT), which is consistent with the average for European Capital Goods companies. It also represents approximately a 25% discount compared to Food & Beverage peers, based on Bloomberg consensus data.
Barclays suggests that there is potential for GEA Group's valuation to be re-rated in the future. The firm posits that an earnings before interest and taxes (EBIT) multiple closer to 15 times could be achievable in the long term for GEA Group, reflecting a more optimistic assessment of the company's financial prospects.
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