On Thursday, Citi analysts updated their financial model for Valeo SA (FR:FP) (OTC: OTC:VLEEY), leading to an increase in the price target from €9.30 to €10.80, while the stock rating remains at Neutral. The stock has shown strong momentum with an 11.9% gain over the past week, currently trading at an EV/EBITDA multiple of 3.66x.
This adjustment reflects the latest modifications in global auto production schedules among other key factors. InvestingPro data reveals 10+ additional insights about Valeo (EPA:VLOF)'s market position and financial health.
The analysts at Citi believe that Valeo is on track to achieve its revenue and EBIT guidance for FY24E, despite previously lowering sales guidance with the Q3 24 results. With current annual revenue of $23.5 billion and a gross profit margin of 18.65%, Valeo's focus on internal cost control and quality improvements is expected to contribute to a 50 basis points enhancement in EBIT margins in the second half of 2024 compared to the first half, with an anticipated similar progression in FY25E.
Valeo's financial outlook benefits from a combination of these internal measures and greater profitability in its backlog, even as the company scales back on capitalization of research and development expenses. Consequently, the forecast for free cash flow (FCF) conversion shows signs of improvement.
The revised financial forecasts from Citi for Valeo span from FY24E to FY26E. While there are minimal changes for FY24E, the analysts have slightly lowered their expectations for FY25E and FY26E, citing reduced margin uplift assumptions and an increase in financial expenses. Nevertheless, the projection for FCF remains mostly unchanged.
The new price target of €10.80 is based on a discounted cash flow (DCF) analysis, which now factors in a more favorable long-term free cash flow estimation, as noted by the Citi analysts. Despite the positive adjustments, Valeo's stock maintains its Neutral/High Risk rating.
In other recent news, Valeo SA has seen some significant developments. CFRA, a financial research firm, has revised its price target for Valeo SA, decreasing it to €8.00 from the previous €9.00 while maintaining a Sell rating. This adjustment is due to a reevaluation of Valeo's performance and market position, taking into account factors like the company's lower margins and a year-over-year decline in third-quarter sales.
On the other hand, BofA Securities has upgraded Valeo from Neutral to Buy, following a significant loss in stock value and a projected decline in earnings per share through fiscal year 2024. The upgrade is attributed to a positive turn in earnings and Valeo's successful acquisition of new business deals. BofA Securities also anticipates growth in areas such as Advanced Driver Assistance Systems, Lighting, and ePowertrain technologies.
These are among the recent developments for Valeo, which has also revised its sales guidance for 2024 downward. However, it has reiterated its operating margin and free cash flow expectations. BofA Securities predicts a robust margin expansion for Valeo in fiscal years 2025-26 and projects a rise in free cash flow, potentially exceeding 20%. Based on these assessments, BofA Securities has increased its earnings estimates by approximately 11% on average for fiscal years 2024 through 2026.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.