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On Tuesday, UBS analyst Gavin Parsons (NYSE:PSN) increased the price target for StandardAero Inc (NYSE: SARO) shares to $28.00, up from the previous target of $27.00. The firm has chosen to maintain a Neutral rating on the stock. According to InvestingPro data, analyst targets for SARO range from $28 to $38, with the stock currently trading at a notably high P/E ratio of 361x. Parsons highlighted that StandardAero, which boasts a market capitalization of $8.8 billion, is experiencing robust revenue growth driven by price, volume, and capacity investment. These factors are enabling the company to invest in future growth opportunities while also enhancing margins and cash flow.
StandardAero’s strategic investments are particularly focused on capturing market share in the CFM56 and CF34 engine markets. With current annual revenue of nearly $5 billion and an EBITDA of $579 million, the company’s service agreement for LEAP engines is noted to provide long-term visibility. While InvestingPro analysis indicates weak gross profit margins of 14.25%, the component repair business is making a significant contribution to growth and margins. Despite the initial dilutive effects of ramping up new programs, StandardAero has managed to offset these and continues to see an uptrend in cash flow.
The analyst pointed out that even though there is a period of elevated investment, StandardAero’s cash flow is expanding. The current stock multiple already reflects the company’s strong growth potential, with InvestingPro analysis suggesting the stock is currently overvalued. The company maintains a healthy current ratio of 2.11, indicating strong liquidity. However, Parsons suggests that there might be a higher near-term earnings upside potential with other names in the Aero sector as StandardAero navigates through this investment phase. This period is expected to lay the groundwork for stronger long-term earnings growth for the company. For a deeper understanding of StandardAero’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
In other recent news, StandardAero Inc. reported a 22% increase in revenue for the fourth quarter of 2024, reaching $1.4 billion. Despite a negative earnings per share of -$0.04, the company saw a positive market reaction, with its stock rising in aftermarket trading. The company’s full-year revenue for 2024 was $5.192 billion, marking a 15% increase from the previous year. Adjusted EBITDA for the fourth quarter grew by 37% to $186.2 million, while net income for the full year was $11 million. However, StandardAero faced a negative free cash flow of $45 million for the year. Looking ahead to 2025, the company projects revenue between $5.8 billion and $5.95 billion, with adjusted EBITDA expected to range from $770 million to $790 million. The company remains focused on strategic initiatives, including the LEAP, CFM56, and CF34 platforms, as well as exploring mergers and acquisitions in Component Repair Services.
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