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Monday, Benchmark analysts reduced the price target on FGI Industries (NASDAQ:FGI) to $2.00 from the previous $2.50, while still maintaining a Speculative Buy rating on the company’s shares. Currently trading at $0.67, the stock is showing signs of being undervalued according to InvestingPro analysis, with a notably low Price/Book ratio of 0.29. The adjustment follows FGI Industries’ announcement of their fourth-quarter results for 2024, which showed a revenue increase of approximately 15% year-over-year, driven by growth across all segments and geographies.
Despite the positive revenue growth, which marked an approximate 12% year-over-year increase for the full year, the company’s profitability did not meet market expectations for the quarter. FGI Industries has been investing heavily in growth, but these investments have impacted the company’s bottom line.
The analyst, Reuben Garner, noted that while the company’s Building Products and Construction (BPC) growth strategy is gaining traction and outperforming the broader market, the Repair and Remodeling (R&R) sector is still encountering significant global headwinds. As a result of these factors, Benchmark has revised its earnings per share (EPS) estimate for the fiscal year 2025 to a loss of $0.05, a decrease from the previously anticipated gain of $0.10.
In his commentary, Garner explained the rationale behind the maintained Speculative Buy rating despite the reduced price target and the downward adjustment in EPS estimates. He pointed out that FGI Industries’ growth investments have successfully increased revenue, and the BPC strategy’s momentum is a positive sign. However, the lowered profitability and the challenging environment have necessitated a more cautious EPS projection for the upcoming fiscal year. The stock has experienced a significant decline, with a one-year return of -52.48%, though analysts maintain optimistic targets. For comprehensive analysis and detailed valuation metrics, investors can access the full Pro Research Report on InvestingPro.
In other recent news, FGI Industries reported its fourth-quarter 2024 earnings, showing a mixed performance with a significant revenue beat but an earnings per share (EPS) miss. The company posted an EPS of -$0.04, which fell short of the forecasted $0.05. However, revenue reached $35.6 million, surpassing expectations of $32.29 million, marking a 15% year-over-year increase. This revenue growth was driven by strong performance across all business segments and geographic regions, including notable growth in the U.S., Canada, and Europe.
Despite the revenue increase, FGI Industries faced challenges with a decreased gross margin of 24.6%, down from 29.2% the previous year. The company is implementing strategic initiatives to counteract macroeconomic challenges, including tariff impacts and supply chain disruptions. Looking ahead, FGI Industries provided revenue guidance for 2025, projecting between $135 million and $145 million, with adjusted operating income ranging from -$2 million to +$1.5 million. These projections suggest cautious optimism, with potential upside if new programs gain traction faster than expected.
During the earnings call, CEO David Bruce expressed confidence in the company’s strategic growth initiatives, emphasizing their role in driving above-market organic growth. Additionally, the company is actively working with suppliers and customers to navigate the evolving tariff environment. As FGI Industries continues to expand its market presence, the company remains focused on mitigating risks and capitalizing on new growth opportunities.
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