On Tuesday, Citi revised its position on Geberit AG (SIX:GEBN:SW) (OTC: GBERY) stock, shifting from a Sell to a Neutral stance. Alongside the rating change, the price target for the Swiss sanitary products manufacturer was increased to CHF555.00, a rise from the previous target of CHF520.00.
The adjustment in rating comes as the company, known for its industry-leading returns and strong financial management, is recognized for its de-levering balance sheet and consistent cash flows.
Geberit's commitment to sales and earnings growth, expanding margins, and the management's ability to deliver positive results are also seen as instrumental factors in the upgraded rating.
Geberit's largest market, Germany, has seen a recent upswing in permits, signaling a potential growth in demand. This is coupled with signs of improving affordability, lower interest rates, and moderating cost inflation across key European markets, which may benefit the company.
Despite these positive indicators, Citi notes that Geberit's stock is trading at 20 times the firm's estimated 2025 EBITDA, which aligns with its long-term average.
This suggests that the market may have already accounted for the company's strong fundamentals. Geberit has historically traded at a premium compared to the sector, approximately 7.4 times the estimated 2025 EBITDA.
Citi concludes by stating that the current risk-reward profile for Geberit appears to be evenly balanced. While the firm has upgraded the stock to Neutral and raised the price target based on EV/EBITDA, it awaits more robust catalysts before considering a Buy rating.
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