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On Wednesday, UBS analyst Joshua Spector upgraded Perimeter Solutions SA (NYSE:PRM) stock rating from Neutral to Buy, setting a new price target of $14.00. The stock, currently trading at $9.11, has experienced significant volatility, having declined over 30% in the past six months according to InvestingPro data. Spector highlighted the company’s robust operating model, which has increased recurring EBITDA by over 70% compared to similar fire seasons in the past. The company maintains strong financial health with a current ratio of 6.31, indicating excellent liquidity. Despite this performance, Perimeter Solutions’ stock has seen a decline of more than 30% since mid-January, though it remains 33% above its 52-week low of $6.84.
Spector views the recent dip in the company’s stock as an opportunity for investors, with the updated price target suggesting approximately 50% potential upside. Looking ahead to 2025, UBS anticipates it to be a reset year for Perimeter Solutions, assuming a ’normal’ fire season compared to an above-average 2024. However, the expected baseline for 2025 is estimated to be around $100 million above previous ’average’ years, with a projected compound annual growth rate (CAGR) of about 7% from this heightened baseline, not factoring in additional capital deployment.
Perimeter Solutions, recognized as a leader in fire retardants for combating wildfires, is expected to benefit from the recent memory of the Los Angeles wildfires. The demand for enhanced capabilities to fight, contain, and prevent wildfires is likely to increase, which could spur growth in the company’s volume sales. This, in turn, is anticipated to bolster the company’s earnings algorithm.
Spector’s assessment indicates that the current PRM stock price is either factoring in no EBITDA growth moving forward or projecting 2025 EBITDA to be approximately 25% below UBS’s 2025 estimates. The upgrade and price target revision reflect UBS’s confidence in Perimeter Solutions’ future growth and earnings potential. InvestingPro analysis reveals 8 additional investment tips and comprehensive valuation metrics for PRM, available in the Pro Research Report, which provides deep-dive analysis of what really matters for over 1,400 US stocks.
In other recent news, Perimeter Solutions reported impressive financial results for the fourth quarter of 2024, with sales increasing by 45% to $86.2 million, surpassing revenue forecasts of $71.48 million. The company’s earnings per share (EPS) reached $0.90, significantly exceeding the expected loss of $0.06. For the full year, sales climbed to $561 million, marking a 74% rise from the previous year, while adjusted EBITDA surged 190% to $280.3 million. In addition to these strong earnings, Perimeter Solutions completed the acquisition of Intelligent Manufacturing Solutions for $33 million, a strategic move aimed at enhancing their capabilities in the printed circuit board market.
Analysts have noted that the company’s financial performance was bolstered by effective cost management and strategic growth initiatives. Despite the robust results, the company’s stock experienced a slight decline in pre-market trading, which may reflect cautious investor sentiment. The acquisition of Intelligent Manufacturing Solutions aligns with Perimeter Solutions’ strategy to expand its specialty products segment, particularly in the PCB market, which is expected to offer solid long-term growth prospects. The company also reported a substantial free cash flow of $172.9 million for the year, providing a strong foundation for future investments and acquisitions. Looking ahead, Perimeter Solutions plans to maintain a leverage ratio around 3.5x through mergers and acquisitions, with continued investment in fire safety and PCB capabilities.
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