On Thursday, Baird adjusted its price target on Azek Co. (NYSE:AZEK), a company specializing in designing and manufacturing outdoor living products, to $54.00 from the previous target of $58.00. Despite the reduction, Baird maintained an Outperform rating on the stock.
The firm's analyst pointed to a mix of factors influencing the decision, noting that while there might be some concerns about near-term demand, there are multiple aspects that could drive the company's revenue growth and margin expansion moving forward. Among these growth factors are market share gains, the launch of new products, an increased mix of recycled materials, and product reconfiguration.
Azek's shares are currently trading at approximately 15 to 16 times the company's projected 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA). Baird's analyst highlighted that the risk/reward ratio remains appealing, with a range of $34 to $68 on a next twelve months (NTM) basis, due to the identified growth and margin levers.
The Outperform rating indicates Baird's positive outlook on Azek's long-term performance, suggesting confidence in the company's potential despite the near-term demand uncertainties. The new price target of $54 reflects a cautious but still optimistic view of Azek's financial prospects.
In other recent news, The AZEK Company Inc., a prominent manufacturer of outdoor living products, has authorized a new stock repurchase program, allowing the company to buy back up to $600 million of its Class A common stock.
This is in addition to the roughly $75 million remaining from a previous authorization. AZEK has also raised its full-year guidance to range from $364-$380 million, indicating strong performance and confidence in future growth.
Analysts from RBC Capital Markets and Barclays (LON:BARC) Capital Inc. have maintained positive ratings for AZEK, reflecting a consensus that the company is well-positioned for continued growth.
Despite an accounting misstatement that required restatements and delayed Q2 results, analysts view the issue as resolved and isolated, with core demand and margin trends remaining favorable.
The company has also received a non-compliance notice from the New York Stock Exchange due to a delay in filing its quarterly financial report. AZEK has a six-month period to file the overdue report and regain compliance.
The company reported a strong second quarter for fiscal year 2024, with an 11% increase in consolidated net sales to $418 million. The company raised its full-year net sales and adjusted EBITDA projections on the back of solid residential segment growth and successful cost-saving initiatives. These are recent developments for AZEK, a company recognized for its innovation, quality, aesthetics, and sustainability efforts.
InvestingPro Insights
As Baird updates its price target for Azek Co. (NYSE:AZEK), it's beneficial to consider additional metrics that can provide a broader financial perspective. According to InvestingPro data, Azek boasts a market capitalization of $6.11 billion and is trading at a Price/Earnings (P/E) ratio of 41.32. This high earnings multiple suggests the market has high expectations for the company's future earnings growth. Moreover, the company has shown a revenue growth of 10.95% in the last twelve months as of Q2 2024, indicating a solid upward trajectory in its financial performance.
From the perspective of InvestingPro Tips, it's noteworthy that analysts expect Azek's net income to grow this year, which could justify the high earnings multiple to some extent. Additionally, the company's liquid assets surpassing short-term obligations is a reassuring sign of financial stability. For investors looking for deeper insights and more such tips, InvestingPro offers a detailed analysis which includes a total of 11 InvestingPro Tips for Azek. These can be found at https://www.investing.com/pro/AZEK, and with the use of coupon code PRONEWS24, investors can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
Understanding the company's valuation is crucial, and with Azek trading at a high Price/Book multiple of 4.41, investors should consider the company's assets and growth prospects when evaluating the stock. The combination of Baird's analysis and InvestingPro's comprehensive data can empower investors to make informed decisions regarding their interest in Azek Co.
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