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Investing.com - UBS downgraded Codan Limited (ASX:CDA) (OTC:CODAF) from Buy to Neutral while raising its price target to AUD29.60 from AUD18.50.
The rating change follows Codan’s strong year-to-date performance, with shares up 75% compared to the ASX Small Ords index gain of 12%. UBS noted that approximately half of this appreciation stemmed from earnings per share upgrades reflecting "very strong execution" of the company’s global growth strategy, while the remainder came from multiple expansion.
UBS cited valuation concerns as the primary reason for the downgrade, pointing out that the stock now trades at a fiscal year 2026 price-to-earnings ratio of 40x, up from 27x at the beginning of 2025.
Despite the downgrade, UBS remains positive on Codan’s global growth opportunities, highlighting three favorable macro themes: strength in gold prices, increases in global defense investment, and public safety spending.
The firm projects a three-year earnings per share compound annual growth rate of 21% from fiscal years 2025 to 2028, resulting in a price/earnings-to-growth ratio of 2x, which UBS considers "fair and full" at current levels.
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