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On Wednesday, Jefferies initiated coverage on Reliance Worldwide Corp Ltd (RWC:AU) (OTC: RLLWF), assigning a Buy rating and setting a price target of AUD6.50. The coverage transfer comes with a positive outlook, as the firm recognizes the company’s adept handling of recent economic challenges and its potential for improved performance.
The newly assumed coverage by Jefferies highlights Reliance Worldwide’s successful navigation through the inflationary environment and a down cycle in volumes. The firm’s analysts commend the company’s pricing and cost discipline, which have contributed to the resilience of its margins despite market pressures.
In their assessment, Jefferies points to Reliance Worldwide’s significant latent capacity, which they believe positions the company to capitalize on operating leverage opportunities. This potential is expected to materialize as market volumes begin to inflect, indicating a possible uptick in the company’s operational performance.
Jefferies’ valuation of Reliance Worldwide suggests that the stock is currently trading at an undemanding valuation. The price target of AUD6.50 implies that the shares are available at a discount to their historical multiples, presenting what Jefferies views as an attractive investment proposition.
The positive stance from Jefferies on Reliance Worldwide follows the firm’s broader analysis of the industry, where they see both Reliance Worldwide and James Hardie Industries (NYSE:JHX:AU), another company covered in their report, as well positioned to deliver on their potential. The analyst’s comment underscores confidence in the companies’ strategic management and their ability to leverage capacity for future growth.
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