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Investing.com -- Jefferies has initiated coverage of Elis (HE:ELISA) with a “buy” rating and a €30 price target, the highest on the street.
The brokerage points to the company’s resilient business model and a defined medium-term growth outlook, supported by a stronger balance sheet and disciplined execution.
Elis generates about 85% of its revenue from rental and maintenance services for linens and workwear, with roughly 30% of that tied to the healthcare sector.
Jefferies says this defensive mix, coupled with a proven management track record, helped the company maintain profitability and cash flow during the COVID-19 pandemic.
The analysts also flag structural industry drivers such as increased outsourcing and room for market consolidation.
The balance sheet has improved meaningfully, with net debt to EBITDA falling from more than 3x in earlier years to 1.85x in fiscal 2024.
Jefferies notes this enhances Elis’s defensive profile and positions it to pursue bolt-on acquisitions without adding leverage.
The brokerage forecasts a compound annual growth rate of about 7% in adjusted earnings per share from 2024 to 2027.
That projection includes around 4% organic revenue growth, evenly split between volume and pricing.
Operating margins are expected to improve by roughly 20 basis points annually from 35.2% in 2024, helped by the rollout of cost initiatives modeled after the company’s operations in France.
Jefferies points to Elis’s high market density, penetration of small and midsize businesses, and cross-selling efforts as further margin drivers. Easing inflation could also support profitability, according to Jefferies’ internal cost tracker.
Jefferies also cites a shift in capital allocation policy as a potential upside catalyst. With debt levels reduced, Elis plans to maintain its focus on acquisitions while introducing shareholder returns as part of its financial strategy.
The analysts estimate the company could have about €500 million in balance sheet capacity by 2027, potentially allowing for €100 million annually in buybacks or special dividends. This would imply a total yield of roughly 4%.
Despite these developments, the stock trades at around 12 times Jefferies’ estimated 2026 earnings, in line with its historical average.
The brokerage argues this valuation does not fully reflect the improved operating and financial profile. Jefferies notes that consistent delivery on earnings growth targets could support multiple expansion.
Key risks include macroeconomic pressure, increased competition, and renewed inflationary headwinds.