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Investing.com - RBC Capital initiated coverage on TMX Group (TSX:X) (OTC:TMXXF) with an Outperform rating and set a price target of C$66.00.
The research firm cited TMX Group’s continued favorable mix shift towards recurring, high-growth revenue as a key factor expected to drive a higher multiple over time.
TMX Group currently trades at 24x next twelve months price-to-earnings ratio, above its long-term historical averages, reflecting the fundamental repositioning of the business over the last decade.
RBC Capital noted that TMX’s recurring revenue has increased from 40% to 50% of total revenue, with management targeting a continued positive mix shift towards 67% over the long term.
The firm described TMX as having a "fundamentally strong business model characterized by a dominant Canadian market share and high barriers to entry," and predicted successful execution of management’s strategy could drive a multiple re-rating to 27x.
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