On Tuesday, Goldman Sachs has maintained its Neutral rating on Vestis Corp (NYSE:VSTS) stock, with a steady price target of $13.60.
The firm's latest assessment indicates a revision of its medium-term revenue growth and EBITDA margin estimates for Vestis. The adjustment follows updated assumptions that point to a longer period needed for the company to achieve improved price realization, customer service quality, and sales force productivity.
The analysis by Goldman Sachs suggests that the path to bolstered growth and margin performance for Vestis will likely be more prolonged due to the extensive and systemic changes required within the business.
Despite these revisions, the firm's fiscal year 2024 revenue growth, EBITDA margins, and EPS estimates remain largely unchanged. However, expectations for fiscal years 2025 and 2026 have been modified, with revenue growth now projected at 1% and 3.5% respectively, down from the previous 2% and 4%.
Furthermore, the anticipated EBITDA margins for fiscal years 2024 and 2025 have been adjusted to approximately 12% and 12.5%, a decrease from the earlier estimates of 13% and 14.5%.
Goldman Sachs believes that the ongoing turnaround efforts at Vestis are adequately represented in the company's current next twelve months (NTM) EV/EBITDA multiple, which is discounted in comparison to its industry peers. The firm's stance reflects a cautious outlook on the company's near-term financial performance amidst its restructuring initiatives.
In other recent news, Vestis Corp's third-quarter earnings report showed a 1.6% decrease in revenue year-over-year, with adjusted EBITDA standing at $87 million. This is consistent with the previous quarter but down $20 million year-over-year.
Despite these figures, the company has seen growth through new business wins and improved customer retention rates. The company's Board of Directors approved a quarterly cash dividend of $0.035 per share.
Vestis Corp has also been involved in significant developments, such as the extension of the tenure of Timothy Donovan, the Executive Vice President, Chief Legal Officer, and General Counsel.
Additionally, the company has sold its 39% equity interest in Aramark Uniform Services Japan Corporation to Mitsui & Co., Ltd. for approximately $37 million, a move to reduce its debt.
In the midst of these developments, Vestis Corp has been discussing a possible acquisition with Elis SA. Analysts from Stifel and Baird have maintained their hold and neutral ratings on Vestis, respectively.
Jefferies has raised the stock's price target to $18.00, maintaining a Buy rating on the stock, reflecting confidence in the company's prospects. These are recent developments in Vestis Corporation's ongoing operations.
InvestingPro Insights
Vestis Corp's (NYSE:VSTS) financial landscape offers additional context to Goldman Sachs' analysis. According to InvestingPro data, the company's market capitalization stands at $1.92 billion, with a P/E ratio of 14.32. This relatively modest valuation aligns with Goldman's cautious stance on the company's near-term prospects.
InvestingPro Tips highlight that Vestis has been profitable over the last twelve months, with analysts predicting continued profitability this year. This supports Goldman's unchanged fiscal year 2024 estimates. Additionally, Vestis has shown a strong return over the last three months, with InvestingPro data indicating a 27.41% price total return in that period. This recent performance may reflect investor optimism about the company's turnaround efforts, despite the longer timeline projected by Goldman Sachs.
It's worth noting that InvestingPro offers 6 additional tips for Vestis Corp, providing a more comprehensive view of the company's financial health and market position. Investors seeking a deeper understanding of Vestis's potential may find these insights valuable in conjunction with Goldman's analysis.
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