On Friday, investment firm TD (TSX:TD) Cowen raised its rating on Parsons Corp . (NYSE:PSN) stock from Hold to Buy, with an increased price target of $90, up from the previous $77. The firm cited several factors behind the optimistic outlook for the defense and intelligence technology provider, including expected adjusted earnings per share (EPS) growth of 18-20% for the years 2024-2025.
The upgrade was influenced by Parsons' strong market positions and robust booking trends that suggest extended prospects. Furthermore, the firm acknowledged an improving revenue mix within Parsons Corp., which is anticipated to contribute to the company's financial growth.
TD Cowen also highlighted the company's attractive merger and acquisition (M&A) strategy as a key driver for the upgrade. The new price target of $90 is based on an 18.8x trailing enterprise value to earnings before interest, taxes, depreciation, and amortization (TEV/EBITDA) multiple, which reflects Parsons' high growth potential relative to its sector.
The analyst's commentary provided a clear rationale for the upgrade, stating, "We're upgrading PSN to Buy for est. 2024-25 adj. EPS growth of 18-20%. Drivers are (1) attractive market positions, (2) strong bookings with extended prospects, (3) an improving revenue mix, and (4) attractive M&A game plan. Our PT is $90, an 18.8x TEV/EBITDA, reflective of PSN's sector high growth."
The revised price target and rating upgrade represent a significant shift in TD Cowen's outlook for Parsons Corp., suggesting a positive future for the company's stock performance based on the factors outlined by the firm.
InvestingPro Insights
Following the positive outlook from TD Cowen, the latest data from InvestingPro shows a robust financial performance for Parsons Corp. (NYSE:PSN), with notable growth metrics. The company's revenue has seen a significant increase over the last twelve months as of Q1 2024, with a growth rate of 31.34%. This aligns with the firm's acknowledgment of an improving revenue mix, which is anticipated to bolster financial growth. Additionally, the company's EBITDA growth rate stands at an impressive 58.0%, underscoring the strong market positions and booking trends highlighted by TD Cowen.
InvestingPro Tips also indicate that Parsons Corp. is expected to be profitable this year, with a net income growth projection. This complements the analyst's expectation of an 18-20% adjusted EPS growth for 2024-2025. On the valuation front, the company is trading at a high earnings multiple, with a current P/E Ratio of 289.85, which may reflect investor confidence in the company's growth trajectory. Moreover, Parsons has demonstrated a strong return over the last year, with a 70.9% price total return, signaling robust stock performance that could be of interest to investors seeking growth-oriented stocks.
For those looking to delve deeper into the financials and future prospects of Parsons Corp., InvestingPro offers an array of additional tips to help make informed investment decisions. There are 14 more InvestingPro Tips available, which can be accessed by visiting https://www.investing.com/pro/PSN. For a more comprehensive analysis, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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