On Wednesday, Resonac Holdings Corp (4004:JP) (OTC: SHWDY) saw its price target increased by Jefferies to JPY4,500 from the previous JPY4,200. The firm has reaffirmed its Buy rating on the stock. The adjustment reflects Jefferies' positive outlook on the company's proactive response to Tokyo Stock Exchange (TSE) reforms.
The Tokyo-based company, specializing in semiconductor materials, has been recognized for its efforts to enhance its balance sheet and focus on return on invested capital (ROIC) versus weighted average cost of capital (WACC). According to Jefferies, these strategic moves are anticipated to drive further share price appreciation for Resonac.
Jefferies highlighted Resonac's strategic shift towards semiconductor materials and its move away from traditional industrial sectors as a key factor in improving its return on equity (ROE) profile. This transition is seen as a strategic alignment with market reforms and is expected to positively impact the company's financial performance.
The analyst from Jefferies stated, "We are using the Jefferies Governance Framework to identify companies that are proactively responding to the TSE reforms. We believe that firms improving B/S and focusing on ROIC vs. WACC would result in outperformance." This approach underscores the firm's methodology in evaluating companies that align with the TSE's regulatory changes.
Resonac's commitment to these reforms and its operational focus has led Jefferies to reiterate its Buy rating. The firm's confidence in Resonac's trajectory is reflected in the revised price target, indicating a positive outlook for the stock's future performance.
InvestingPro Insights
In light of Jefferies' updated outlook on Resonac Holdings Corp, recent data from InvestingPro provides additional context to the company's financial health and performance. With a market capitalization of $4.23 billion, Resonac's presence as a prominent player in the Chemicals industry is notable. Despite not being profitable over the last twelve months, as indicated by a negative P/E ratio of -33.87, the company has experienced a high return over the last year, with a 23.56% increase in price total return. The firm's strategic shift towards semiconductor materials may have contributed to this growth, aligning with the InvestingPro Tip highlighting Resonac as a strong returner over the last three months with a 20.73% price total return in the last six months.
Furthermore, Resonac's trading near its 52-week high, with the price at 100% of this peak, suggests investor confidence. However, it's crucial to note that InvestingPro's fair value estimate stands at $14.39, below the current price, signaling potential overvaluation. For investors seeking deeper insights and additional InvestingPro Tips, such as the company's high shareholder yield and positioning in the market, visit https://www.investing.com/pro/SHWDY. There are 7 more tips available, which could prove invaluable for making informed decisions. Don't forget to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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