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On Monday, DA Davidson made an adjustment to the price target for Federal Signal (NYSE:FSS), reducing it to $82.00 from the previous figure of $90.00. Despite this change, the firm has decided to maintain a Neutral rating on the company’s shares. The stock has experienced significant pressure recently, with InvestingPro data showing a 10.5% decline in the past week and currently trading at $81.28.
The adjustment to the price target was based on a valuation of roughly 13 times the estimated next-twelve-months enterprise value to EBITDA (EV/EBITDA) for Federal Signal. Current InvestingPro data shows an EV/EBITDA of 14.72x, with the company maintaining strong fundamentals including $1.86 billion in revenue and 8.1% growth. DA Davidson’s analysts acknowledged the company’s strong track record, noting that Federal Signal has effectively executed its plans in recent years, a performance that is reflected in its stock price.
Federal Signal’s stock has been trading at more than a 50% premium, which, according to DA Davidson, is a significant factor in their assessment. The company maintains a P/E ratio of 23.22x and a strong financial health score of GOOD according to InvestingPro analysis. While the firm recognizes the company’s accomplishments, they also pointed out that there are other companies within their coverage universe that are at an earlier stage of multi-year growth and margin improvement. These companies may present better investment opportunities at the current time.
The analysts at DA Davidson stated their readiness to recommend Federal Signal as an investment once the entry point becomes more reasonable. They believe that a more attractive valuation could make Federal Signal a more compelling buy for investors.
Federal Signal, known for its manufacturing of a range of specialized vehicles and equipment, has been a consistent performer in the market. However, the recent price target adjustment by DA Davidson reflects a cautious outlook based on the company’s current valuation relative to its growth prospects.
In other recent news, Federal Signal Corporation reported its fourth-quarter and full-year 2024 earnings, revealing solid growth in both revenue and earnings per share (EPS). The company achieved a quarterly revenue of $472 million, marking a 5% increase year-over-year, and an adjusted EPS of $0.87, which matched analyst forecasts. Additionally, Federal Signal’s annual net sales reached a record $1.86 billion, an 8% rise from the previous year. Looking ahead, the company projects 2025 net sales between $2.02 billion and $2.10 billion. Federal Signal also anticipates an adjusted EPS range of $3.60 to $3.90 for 2025, with expectations of double-digit pre-tax earnings improvement. Furthermore, Federal Signal completed the strategic acquisition of Hogg Technologies, which is expected to align with the company’s margin target range by 2026. Despite these positive developments, the company’s stock experienced a decline in pre-market trading due to investor concerns over a minor revenue miss.
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