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Investing.com -- Rotork Plc’s stock jumped by more than 5% on Tuesday following its FY24 results, which provided strong evidence of the company’s ability to execute its initiatives.
Rotork’s second-half EBITA of £102 million exceeded expectations by 2%, driven by organic sales growth that outpaced consensus by 50 basis points and an EBITA margin that was 20 basis points ahead.
The company’s FY24 book-to-bill ratio stood at 0.99x, but early 2025 momentum suggests solid underlying business strength.
One of the standout elements of the report was Rotork’s acquisition of Noah, a leading South Korean electric actuator manufacturer, for £44 million at an estimated 2.5x EV/Sales for 2025.
Morgan Stanley (NYSE:MS) notes that this acquisition should contribute approximately 2.3% to Rotork ’s revenue over the next year.
This acquisition aligns well with Rotork’s broader strategy of expanding its market presence in growth segments, which collectively grew 9% in 2024, outpacing the company’s overall organic growth rate of 8.2%.
Rotork also announced a new £50 million share buyback program, representing approximately 1.9% of the company’s market capitalization.
Morgan Stanley regards this move as a demonstration of the company’s disciplined approach to capital allocation.
The company closed 2024 with a net cash position of £125 million, reinforcing its financial stability and flexibility for future strategic investments.
Rotork continues to impress with strong free cash flow conversion at 119% and a return on capital employed of 37%, underscoring the company’s high-quality characteristics.
Morgan Stanley raised its 2026 forecasts by 3% above consensus expectations and increased its price target from 365p to 376p.
The brokerage maintains an "overweight" rating on Rotork, citing its strong execution of its Growth+ strategy and favorable valuation at 12.0x 2026 EV/EBITA, which represents a slight discount to the broader sector.
The outlook for 2025 remains a critical test for Rotork, as the company faces challenges such as a leaner backlog, reduced pricing tailwinds, and a more uncertain macroeconomic environment.
However, Morgan Stanley remains confident in Rotork’s ability to navigate these challenges, citing its strong positioning in key growth segments, relatively favorable comparisons in consumer price inflation, and a solid balance sheet.