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On Wednesday, BofA Securities analyst David Amira revised the rating for Wolters Kluwer (AS:WLSNc) NV (WKL:NA) (OTC: WTKWY), elevating it from Neutral to Buy. The decision is accompanied by a maintained price target of EUR 165.00 ($180.40 ADR equivalent), reflecting confidence in the company's prospects despite economic uncertainties. According to InvestingPro data, the stock currently trades at a P/E ratio of 30.85x and is currently near its 52-week low, presenting a potential opportunity for value investors.
Amira's upgrade is primarily driven by two factors. First, he notes that the increased economic uncertainty has shifted the market's focus from long-term growth potential to near-term resilience. Wolters Kluwer is considered the most defensive among the firms covered by BofA Securities, and its projected 5.8% organic sales growth in 2025 is expected to remain stable. InvestingPro analysis supports this defensive positioning, showing impressive gross profit margins of 72.52% and a strong financial health score rated as "GOOD" by the platform's comprehensive evaluation system.
Second, the analyst points to the company's valuation as a compelling reason for the upgrade. Wolters Kluwer has experienced a devaluation of approximately 25% from its peak, an event compared to the market downturn during the COVID-19 pandemic. However, with a valuation of 17 times the 2025 expected enterprise value to EBITDA (EV/EBITDA) ratio, and considering a 10% compound annual growth rate (CAGR) in earnings per share (EPS) over five years, along with a return on capital employed (ROCE) exceeding 20%, Amira views the current stock price as an attractive opportunity for investors.
The unchanged price objective of EUR 165.00, which has been slightly adjusted for the American Depositary Receipt (ADR) from US$179.30 to US$180.40, suggests that the analyst sees a solid upside potential for the stock.
Wolters Kluwer's performance and resilience in the face of economic challenges have positioned it favorably in the eyes of BofA Securities, as reflected in the upgraded rating. The company's defensive nature and appealing valuation appear to offer an opportunity for investment, as indicated by the analyst's remarks.
In other recent news, Wolters Kluwer has announced an agreement to acquire Registered Agent Solutions, Inc. (RASi) for approximately $415 million in cash. This acquisition is expected to enhance Wolters Kluwer's Financial & Corporate Compliance division by expanding its reach to small businesses and law firms across the U.S. The acquisition is anticipated to have a minimal short-term impact on Wolters Kluwer's adjusted earnings and is expected to close in the first half of 2025, pending regulatory approvals. RASi reported revenues of about $52 million in 2024 and has shown consistent profitability. In analyst news, Morgan Stanley (NYSE:MS) downgraded Wolters Kluwer's stock rating from Overweight to Equalweight, adjusting the price target to EUR170.00 from EUR184.50. The downgrade reflects a cautious outlook on the company's medium-term growth prospects, with revised earnings forecasts for 2024 to 2027. Morgan Stanley analysts now predict organic growth of 5.7% for 2025 and 6.1% for 2026, lower than previous estimates. Despite the downgrade, the strategic priorities set by Wolters Kluwer's management to accelerate growth are acknowledged, although growth may be driven more by mergers and acquisitions, which are not included in the current projections.
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