RBC raises Legrand stock rating, price target to €113 from €87

Monday, RBC Capital Markets adjusted its stance on Legrand SA (EPA:LEGD) (LR:FP) (OTC: LGRDY), shifting from an Underperform to a Sector Perform rating and increasing the price target to €113.00, up from €87.00. The stock, currently trading at $22.92, is near its 52-week high of $23.63, with InvestingPro data indicating the stock is trading above its Fair Value. The upgrade reflects the analyst’s view that the company’s main challenges have begun to subside after a period of share price underperformance that began in late 2023. This recovery is evident in the stock’s strong performance, with an impressive year-to-date return of 18.69%.

Legrand, a global specialist in electrical and digital building infrastructures, is seen to benefit from an improving construction cycle in Europe and North America, which RBC Capital Markets believes has reached its lowest point. The company’s growing involvement in the rapidly expanding datacenter market is also a contributing factor to the improved rating. In 2024, Legrand’s sales from datacenters increased by 5 percentage points year-over-year, accounting for 20% of its total sales.

The analyst highlighted Legrand’s consistently strong margins and cash conversion as additional strengths supporting the rating upgrade. According to InvestingPro data, the company maintains impressive gross profit margins of 51.64% and has maintained dividend payments for 20 consecutive years, demonstrating consistent financial strength. These financial metrics, coupled with what RBC considers a reasonable valuation of the company’s stock, have led to a more positive outlook.

Legrand’s enhanced focus on the datacenter market is particularly noteworthy, as this sector continues to grow swiftly. The company’s strategic positioning in this area appears to be paying off, with a significant portion of its sales now derived from datacenter-related products and services.

The new price target of €113.00 set by RBC Capital Markets suggests confidence in Legrand’s potential for stable financial performance moving forward. This target represents a substantial increase from the previous target and indicates a shift in expectations regarding Legrand’s market positioning and future growth prospects. With a market capitalization of $30.28 billion and a P/E ratio of 24.81, investors seeking deeper insights into Legrand’s valuation metrics and growth potential can access additional analysis through InvestingPro, which offers 8 more exclusive tips about the company’s performance and outlook.

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