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On Monday, HSBC analyst Max Church raised the stock rating of Greencore Plc (GNC:LN) (OTC: GNCGY) from Hold to Buy, adjusting the price target to GBP2.30, up from the previous GBP2.00. According to InvestingPro analysis, the stock appears undervalued at current levels, supporting Church’s bullish stance. The analyst’s optimism is rooted in the company’s potential to achieve its financial goals, which include a 7% adjusted EBIT margin, mid-single digit revenue growth, and over 15% return on invested capital (ROIC) over the medium term.
Greencore, which specializes in the manufacture of convenience foods, is recognized for its substantial increase in profitability for the fiscal year 2024. The company has demonstrated strong financial health with a perfect Piotroski Score of 9, as reported by InvestingPro. Church notes that there is ample opportunity for Greencore to continue enhancing efficiency and securing additional contracts, which would support a continued rise in both profitability and returns in the short to medium term. The company’s impressive 90.58% return over the past year and healthy 33.18% gross profit margin underscore this potential.
Based on these assessments, HSBC has revised its earnings per share (EPS) estimates for Greencore upward by 4.4% for fiscal year 2025, 5.3% for fiscal year 2026, and 13.3% for fiscal year 2027. The analyst’s report suggests that Greencore’s transition to a higher margin and higher return business could lead to gains in its share price.
Church’s report indicates that while revenue expectations remain largely unchanged, significant improvements in margins are anticipated to be the primary drivers of Greencore’s increased profitability. The analyst expects that Greencore will achieve the targeted 7% adjusted EBIT margin by fiscal year 2029.
In other recent news, Greencore Plc has been the focus of attention from major financial analysts. Deutsche Bank (ETR:DBKGn) upgraded Greencore’s stock rating from Hold to Buy, with a new price target set at GBP2.25, following the company’s recent Capital Market Event. The upgrade reflects Greencore’s focus on improving returns, aiming for a medium-term target of over 15% return on invested capital, up from 11.5% in fiscal year 2024. Analysts at Deutsche Bank highlighted Greencore’s strategies for consistent revenue growth and improved operating profit margins, while also noting potential growth through mergers and acquisitions.
Meanwhile, RBC Capital initiated coverage on Greencore with an Outperform rating and a price target of GBP2.40. Their analysis emphasizes the company’s strategic plan for 2023, which aims to restore profitability to pre-Covid-19 levels and achieve a margin progression to 6%. RBC Capital pointed out the potential for shareholder returns through share buybacks and possible mergers and acquisitions. The firm believes Greencore’s valuation aligns with industry peers, indicating confidence in its market position and financial strategy. Both firms’ analyses underscore Greencore’s focus on enhancing shareholder returns and achieving strategic financial objectives.
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