On Monday, Jefferies made a bullish move on Ingevity Corp (NYSE: NYSE:NGVT) stock, upgrading from Hold to Buy and increasing the price target to $62 from $52.
The firm cited several factors that are expected to drive the company's financial performance in the coming years. This upgrade comes as Ingevity's activated carbon volumes are benefiting from hybrid vehicle sales outperforming electric vehicle sales.
The analyst from Jefferies pointed to a projected 4% rise in segment sales and a 7% increase in EBITDA through 2026 for Ingevity, driven by the strong performance of hybrid vehicles. This trend is anticipated to continue bolstering the demand for activated carbon, a key product for the company.
Additionally, the Performance Chemicals division is expected to experience an EBITDA rebound, thanks to a re-stock cycle, changes in feedstocks, and a strategic focus on higher-margin products.
The financial outlook for Ingevity also appears positive, with the firm noting that Free Cash Flow (FCF) to Sales ratio was at 9% in 2023 and is likely to leap to 16% in 2024. This significant increase in FCF/Sales is seen as a strong indicator of the company's growing profitability and efficiency.
The valuation of Ingevity's stock also played a role in the upgrade. According to the analyst, the stock is currently trading below its 5-year average, which suggests that a re-rating of the stock's value could be on the horizon. This potential for a market reassessment of Ingevity's stock value contributed to the decision to upgrade the stock to a Buy rating.
InvestingPro Insights
As Jefferies upgrades Ingevity Corp (NYSE: NGVT) to a Buy rating, real-time metrics from InvestingPro provide additional context that may be of interest to investors considering this stock. Ingevity's management has shown confidence in the company through aggressive share buybacks, a move that often signals a belief in the company's value and future performance. Moreover, analysts are expecting net income growth this year, aligning with Jefferies' positive outlook.
While Ingevity's stock price has experienced volatility, with a -37.6% price total return over the past year, analysts predict the company will turn profitable this year. This is reflected in the adjusted P/E ratio for the last twelve months as of Q4 2023, which stands at a more optimistic 15.25. The company's revenue growth has been modest at 1.43% for the same period, and it's important to note that Ingevity does not pay a dividend, which might influence investment decisions for income-focused shareholders.
For investors seeking further insights, there are additional InvestingPro Tips available, which delve deeper into Ingevity's financial metrics and market performance. Using the promo code PRONEWS24, readers can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking even more valuable investment tips.
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