On Wednesday, C&A Modas Ltda (CEAB3:BZ) received an upgrade from Citi from Neutral to Buy. The firm cited the company's consistent performance, outpacing CitiE and consensus for over five consecutive quarters.
C&A's stock has seen a significant increase, climbing over 150% in the last twelve months (LTM). The analyst pointed to the company's ongoing benefits from structural improvements in logistics and credit tools, which are expected to boost sales per square meter and gross margins in apparel.
C&A is also anticipated to see margin improvements in its ancillary categories, such as electronics and cosmetics, as it expands and prioritizes its management beauty products. These enhancements in operations are projected to help C&A further reduce its debt levels. The firm's year-end 2024 debt-to-EBITDA ratio is estimated to drop to 1.0x, a significant improvement from 1.5x in 2023 and 3.1x in 2022.
Following the first quarter of 2024 results, Citi has adjusted its estimates, suggesting that C&A is trading below an 11x price-to-earnings ratio for 2025.
This valuation is considered attractive compared to global fashion industry peers and does not yet account for the potential for nearly 80% compound annual growth in earnings per share from approximately 2024 to 2027. This optimistic outlook for sustained growth and profitability has led to the upgrade of C&A's stock rating to Buy.
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