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Investing.com - Macquarie downgraded Codan Limited (ASX:CDA) stock rating to Neutral from Outperform on Friday, while simultaneously raising its price target to AUD27.15 from AUD17.00, representing a 60% increase.
The significant price target boost was primarily driven by earnings revisions exceeding 10% and smaller upgrades projected for future years, accounting for approximately 36% of the increase. Additional changes to discounted cash flow inputs, including a reduction in weighted average cost of capital from 9.2% to 8.5%, also contributed to the higher valuation.
Macquarie described Codan’s recent performance as a "standout result and hard to fault," noting that the company’s Detection division delivered significant results that exceeded expectations amid strong market tailwinds.
The research firm also highlighted that Codan’s Communications division continues to build confidence in its ability to achieve 10-15% growth in the medium term, reinforcing positive operational momentum across business segments.
Despite these positive factors, Macquarie justified its rating downgrade by pointing to Codan’s current valuation, with shares trading at 24 times fiscal year 2026 estimated enterprise value to earnings before interest and taxes (EV/EBIT), indicating the stock has reached Macquarie’s discounted cash flow valuation.
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