On Wednesday, Jefferies, a global investment banking firm, updated its assessment of Fisher & Paykel Healthcare (FPH:NZ) (OTC: FSPKF) shares, increasing the price target to NZD26.50, up from the previous NZD23.50. The firm has decided to maintain a Hold rating on the stock.
The updated price target reflects Jefferies' expectation of Fisher & Paykel's strong growth in the fiscal year 2025, attributing this to the company's launch of new products and an expanded base. Fisher & Paykel has a history of leveraging continuous investments to foster growth. J
efferies forecasts a 12% revenue growth year-on-year for the company, propelled by new application consumables and obstructive sleep apnea (OSA) masks, which are expected to grow by 18% and 10% on prior corresponding period (pcp), respectively.
The investment banking firm also anticipates that Fisher & Paykel will achieve a 100 basis point expansion in gross margin, thanks to manufacturing efficiencies. This growth is seen as a testament to the company's strong operational capabilities.
Despite the optimistic growth projections, Jefferies expresses a note of caution regarding the stock's valuation. The firm points out that, with a forward price-to-earnings (PE) ratio of approximately 49 times, Fisher & Paykel's stock appears too expensive for their liking. This valuation metric is critical for investors as it compares the current share price to per-share earnings, indicating the market's expectations of the company's future profitability.
In summary, while acknowledging Fisher & Paykel's robust franchise and its potential for growth in the coming fiscal year, Jefferies holds back from a more bullish stance due to the stock's current valuation. The company's strategic investments in new products and efficiency improvements are expected to yield notable revenue growth and margin expansion, but the high PE ratio remains a point of concern for the investment firm.
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