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On Friday, CFRA analyst Alan Lim Seong Chun revised the rating for Travis Perkins (LON:TPK:LN) (OTC: TPRKY), shifting from Strong Sell to Hold while maintaining the price target at GBP6.50. Currently trading at $8.43, InvestingPro analysis suggests the stock is undervalued. The decision to hold the price target steady is based on an enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of 6.5 times, which is one standard deviation below the 10-year average valuation for the company.
The analyst pointed to the Merchanting segment’s deteriorating outlook as a justification for the discounted valuation. This segment is responsible for approximately 80% of Travis Perkins’ revenue of $6 billion. The downgrade in the stock’s rating in the past was vindicated by a 26% decline in share price following CFRA’s last report on October 24, 2024. According to InvestingPro, the stock has shown significant volatility, with a beta of 1.55 and a 27% decline over the past six months.
Travis Perkins’ share price drop is attributed to a 5.7% fall in Q3 2024 revenue, which the analyst believes signals increasing competition that may structurally impair the company’s profit margins and market share. With the share price now nearing CFRA’s target, the firm has adjusted its recommendation to Hold.
The company is expected to announce its full-year results for 2024 on March 18, 2025. The announcement will provide investors with further insights into Travis Perkins’ financial health and market position following a challenging quarter.
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