On Friday, BMO Capital Markets updated its outlook on shares of Enerflex Ltd. (EFX:CN) (OTC: ENRFF), increasing the price target to C$15.00 from the previous C$11.00. The firm has maintained an Outperform rating on the stock. The revision comes after Enerflex's recent financial results, which surpassed analyst expectations, primarily due to the strong performance of its Engineered Systems (EI) and Aftermarket Services ( AMS (VIE:AMS2)) segments.
The analyst highlighted that the recurring nature of revenues from these segments contributes to the stability of Enerflex's earnings. Moreover, with the company's leverage now within its target range, there is potential for growth in shareholder returns. The analyst suggested that this could include a Normal Course Issuer Bid (NCIB) as early as 2025, assuming the company continues to successfully implement its strategic plans.
Enerflex's current valuation was noted to be at a significant discount, trading at approximately 3.8 times BMO's 2025 estimated enterprise value to EBITDA (EV/EBITDA) ratio. This is considerably lower compared to its compression peers, which trade between 7 to 10 times. The analyst believes that there is room for upside in Enerflex's valuation, especially in light of this discount.
The company's solid financial performance and the potential for enhanced shareholder returns have contributed to BMO Capital Markets' decision to raise the price target. The Outperform rating reflects the firm's confidence in Enerflex's ability to continue its positive trajectory and execute on its strategic objectives.
In summary, BMO Capital Markets has raised its price target on Enerflex Ltd. to C$15.00, up from C$11.00, while reiterating an Outperform rating. This adjustment is based on the company's strong segment performance and its positioning for potential growth in shareholder return programs.
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