On Friday, Goldman Sachs (NYSE:GS) made a positive adjustment to its stance on Worley Ltd (WOR:AU) (OTC: WYGPY), shifting the rating from Neutral to Buy. The firm also increased the price target to AUD17.50, up from the previous AUD17.25. The decision comes after observing Worley's share price movement relative to the market and its peers.
The analyst at Goldman Sachs noted that Worley's average next twelve months (NTM) premium compared to its peers has realigned with its three-year average of 11%. This observation plays a key role in the firm's price target, which is based on the expectation that this relative valuation will continue into the next year plus one earnings period. In comparison to the S&P/ASX 200, Worley's stock is trading in line with the market, which is a change from its three-year average premium of 26% and five-year average of 9%.
Worley's share price has declined by 6% over the last six months, which contrasts with an 11% increase for the ASX200 index. Goldman Sachs views this recent underperformance as an opportunity for investors to buy the shares without affecting the firm's fundamental valuation of the company.
The price target adjustment is supported by the firm's discounted cash flow (DCF) and enterprise value to earnings before interest and taxes (EV/EBIT) methodologies, which remain unchanged. With the new target of AUD17.50, Goldman Sachs anticipates a potential upside of 16% for Worley's stock, compared to the coverage median potential upside of approximately 9%. The analyst's comments suggest confidence in the stock's value proposition and its alignment with historical valuation patterns.
InvestingPro Insights
The recent upgrade of Worley Ltd (WOR:AU) (OTC: WYGPY) by Goldman Sachs to a Buy rating aligns with some key metrics and InvestingPro Tips that suggest potential for growth and profitability. With a market capitalization of $5.22 billion and a robust revenue growth of 15.21% in the last twelve months as of Q2 2024, Worley's financial health appears to be on a positive trajectory. The company's P/E ratio stands at 32.59, reflecting a premium valuation, which may be justified by the expected net income growth this year, as noted in one of the InvestingPro Tips. Additionally, the company's dividend yield of 3.78% as of March 2024, coupled with a significant dividend growth of 38.45%, provides an attractive return for income-focused investors.
Another InvestingPro Tip to consider is Worley's trading near its 52-week low, which could indicate a potential buying opportunity for investors, echoing Goldman Sachs' view on the recent underperformance as an opportune entry point. Moreover, the company operates with a moderate level of debt, which is a positive sign for investors concerned about financial stability. For those seeking more in-depth analysis, there are 6 additional InvestingPro Tips available that could further inform investment decisions regarding Worley Ltd.
To gain access to these valuable insights, investors can explore the dedicated page for Worley Ltd at https://www.investing.com/pro/WYGPY. And for those who decide to take their investment analysis to the next level, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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