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On Tuesday, UBS analyst Graham Doyle increased the price target for ConvaTec Group Plc. (CTEC:LN) (OTC: CNVVY) shares to GBP3.75, up from the previous GBP3.60, while reiterating a Buy rating on the stock. Doyle’s optimism is based on the projection that ConvaTec will achieve a second consecutive year of double-digit EPS growth in 2025, despite facing a 6-7% headwind from reimbursement changes.
Doyle highlighted several factors that could lead to further upside for ConvaTec, estimating a potential increase of up to approximately 30%. These factors include significant contributions from two key product launches, the company’s balance sheet flexibility, and the possibility of a favorable reversal in the Wound Local Coverage Determination (LCD) ruling. Additionally, Doyle anticipates a natural acceleration in top-line growth, which is expected to be fueled by the recovery of lost InnovaMatrix revenues and the ongoing introduction of products from ConvaTec’s robust pipeline.
The analyst’s confidence is rooted in ConvaTec’s anticipated faster revenue growth, greater margin expansion, and superior free cash flow (FCF) generation when compared to its sector peers over the medium term. Doyle’s valuation implies a 27x 2025 estimated PE ratio, which represents a roughly 20% premium over the sector. However, given ConvaTec’s promising growth and financial performance prospects, UBS maintains its Buy recommendation.
UBS also recognizes ConvaTec as one of its Top Picks within the sector, alongside other companies such as Alcon (NYSE:ALC) and BioMerieux, both of which also carry a Buy rating from the firm. ConvaTec’s strong forecast for earnings and revenue growth, coupled with strategic product launches and market positioning, underpin the raised price target and the continued positive outlook from UBS.
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