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Investing.com - Berenberg initiated coverage on Zotefoams (LON:ZTF) with a Buy rating and a price target of GBP5.40, citing the foam manufacturer’s strategic shift and growth prospects.
The research firm highlighted Zotefoams’ position as a global leader in high-performance foam manufacturing and its strategic pivot toward a more customer-focused approach that emphasizes the value-add of its products rather than the products themselves.
Berenberg projects a multi-year earnings per share acceleration of approximately 40% from 2024 to 2027, despite expectations of low free cash flow in 2025 and 2026 while the company invests in growth initiatives.
The investment bank noted Zotefoams’ expansion into Asia to capitalize on its success with Nike, estimating significant potential upside to long-term forecasts in a blue-sky scenario based on discounted cash flow analysis.
According to Berenberg’s analysis, Zotefoams currently trades at a price-to-earnings ratio of 13.8x for fiscal year 2025, an enterprise value to EBIT ratio of 10.3x, and offers a free cash flow yield of 7.2%.
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