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On Thursday, Needham analysts adjusted their financial outlook for Endava PLC (NYSE:DAVA), reducing the price target from $43.00 to $38.00 while maintaining a Buy rating on the company’s shares. The stock has experienced significant pressure, falling over 11% in the past week and trading at $29.42. According to InvestingPro analysis, the company’s current market capitalization stands at $1.74 billion, with the stock showing potential upside based on its Fair Value assessment. The revision follows Endava’s second-quarter fiscal year 2025 results, which revealed a mixed performance. The company experienced a decline in revenue due to a 9% quarter-over-quarter drop in the TMT (Technology, Media, and Telecommunications) vertical. Despite this, Endava’s profit before tax (PBT) margins and earnings per share (EPS) exceeded expectations, attributed to effective cost management strategies. InvestingPro data shows the company maintains strong financial health with a current ratio of 1.9x, indicating solid liquidity. Last twelve months revenue reached $999.25 million, though showing a 5% year-over-year decline.
Endava also released guidance for the third quarter, alongside an adjusted forecast for the full fiscal year 2025. The updated guidance suggests a slower growth trajectory but anticipates improved profitability. The analyst noted the current cautious stance on client spending as a point of concern, yet highlighted that Endava’s stock is trading at an attractive fiscal year 2026 price-to-earnings (P/E) multiple of approximately 14.5 times. Current market data from InvestingPro shows a trailing P/E of 197x and an EV/EBITDA multiple of 30.2x, with analysts predicting improved profitability for the coming year. Get access to 8 additional exclusive ProTips and comprehensive valuation metrics with an InvestingPro subscription. This valuation, according to the analyst, mitigates potential downside risks.
The report further discussed the future prospects of Endava, pointing to the anticipated impact of artificial intelligence (AI) adoption on growth in the second half of calendar year 2025 and into calendar year 2026. Additionally, there is an expectation of increased demand for the company’s core digital transformation services. Based on these factors, the analyst believes Endava presents a compelling investment opportunity for Small/Mid-cap Value/Growth at a Reasonable Price (SMID Value/GARP) investors. Dive deeper into Endava’s growth potential with the comprehensive Pro Research Report, available exclusively on InvestingPro, offering expert analysis and actionable insights for informed investment decisions.
In summary, while the price target for Endava has been lowered, the Buy rating remains unchanged. The analyst’s outlook suggests that, despite short-term pressures, the company’s longer-term growth potential and current valuation offer an attractive balance of risk and reward.
In other recent news, Endava Ltd announced its Q2 FY2025 earnings, revealing an adjusted diluted EPS of 0.3p, which surpassed analyst expectations of 0.25p. The company’s revenue was reported at £195.6 million, slightly below the projected £196.11 million. Despite the revenue shortfall, Endava saw a notable revenue increase of 32.7% in North America. The company is focusing on AI development, which is driving growth across various sectors, including pharmaceuticals and insurance. Endava also announced a share buyback program totaling $100 million, pending shareholder approval. Looking ahead, the company projects Q3 FY2025 revenue between £198-200 million and full-year revenue guidance of £795-800 million. Analyst firms such as TD Cowen and Bank of America have shown interest in the company’s strategic initiatives and AI-driven projects. The integration of the Galaxy acquisition continues to be a focus, with expectations for further operational alignment and cost optimization.
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