On Monday, Stifel announced an upgrade of Eiffage SA (FGR:FP) (OTC: EFGSY) stock from Hold to Buy and increased the price target to €125 from the previous €101. The financial services firm highlighted Eiffage's strong fundamental business and improving investor interest as key reasons for the upgrade.
The company, which had been trailing the market and its closest peer for over a year, primarily due to capital allocation concerns, is now considered undervalued compared to its peers.
Stifel's decision to raise the price target reflects their belief that the market's valuation of Eiffage has been excessively pessimistic. The firm acknowledges that Eiffage has a robust underlying business, which is now being recognized as investor interest grows and the company's communication improves. The upgrade aligns with Stifel's broader sector strategy, which includes a shift towards value stocks and a gradual reorientation from North American to European market exposure.
The market's attention, according to Stifel, is expected to shift towards Eiffage's further investments in concessions, particularly focusing on Getlink. This strategic move is anticipated to balance the upcoming conclusion of the APRR concession. The adjustment in the price target and rating is a reflection of the firm's confidence in Eiffage's potential for growth and ability to manage its investment portfolio effectively.
Eiffage's stock performance had lagged due to investor concerns over how the company allocated its capital. However, Stifel's analysis suggests that the company's market position is now on an upswing, with improved communication and strategic investments poised to enhance its appeal to investors.
The upgraded rating and new price target signify a positive outlook for Eiffage from Stifel, as the company continues to strengthen its investment in concessions and capitalize on its strong business foundation.
InvestingPro Insights
In light of Stifel's upgrade of Eiffage SA, current InvestingPro data provides a deeper financial perspective on the company's performance. As of the last twelve months leading up to Q4 2023, Eiffage boasts an impressive gross profit margin of 82.36%, reflecting the company's efficiency and strong pricing power. With a market capitalization of $9.93 billion and a low P/E ratio of 9.1, the company is trading at a discount relative to its near-term earnings growth potential. This is further substantiated by a PEG ratio of 0.72, indicating that the stock may be undervalued considering its earnings growth rate.
InvestingPro Tips highlight Eiffage's consistency in raising its dividend for four consecutive years, with a current dividend yield of 2.78%, and a significant dividend growth of 22.14% over the last twelve months. Such financial stability and shareholder-friendly policies may appeal to income-focused investors. Additionally, the company is recognized as a prominent player in the Construction & Engineering industry, with analysts predicting profitability this year, bolstered by profitability maintained over the last twelve months.
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