SIG Combibloc stock upgraded by Jefferies citing growth in resilient markets
On Friday, SIG Combibloc Group AG (SIGN:SW) (OTC: SCBGF) received an upgrade in stock rating from Jefferies, with the firm initiating coverage of the stock with a Buy rating and setting a price target of CHF21.10. The company, known for its food and beverage packaging solutions, was recognized for its growth potential in resilient market sectors.
Jefferies highlighted SIG Combibloc’s defensive positioning in the packaging industry, focusing on the food and beverage end markets, which are expected to remain robust.
The analyst noted the company’s potential to benefit from lower interest rates and inflation, favoring downstream converting over upstream production in the current economic cycle.
The firm’s analysis suggested that SIG Combibloc could see improved share performance if it successfully manages its price/cost spread leading into 2025.
Additionally, enhancing earnings quality through reduced adjustments and achieving a return to 4-6% top-line growth in 2025 were cited as key drivers for the stock’s potential success.
Jefferies also pointed out SIG Combibloc’s medium-term sales growth algorithm, projecting 4-6% per annum sales growth. This expectation is based on the company’s defensive “razor and razor blade” sales model.
Furthermore, the firm is targeting greater than 27% EBITDA margins, which could underpin high single-digit earnings per share (EPS) growth compound annual growth rate (CAGR).
The price target of CHF21.10 is derived from a discounted cash flow (DCF) analysis. At the time of the rating, SIG Combibloc was trading at 21 times price-to-earnings (PE), 10.6 times enterprise value to EBITDA (EV/EBITDA), and with an approximate 3% dividend yield projected for 2025.
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