On Monday, RBC Capital initiated coverage on Loar Holdings Inc (NYSE: LOAR), a small-cap aerospace company, with an Outperform rating and a price target of $60.00. The firm highlighted the company's significant aftermarket profits, which account for approximately 70% of its total profits, as a key strength.
The coverage comes with a positive outlook on Loar's future, citing its advantageous position to gain from the ongoing robustness in the commercial aftermarket. RBC Capital also pointed to the company's potential for steady margin growth, a positive turn in free cash flow (FCF), and the possibility of further growth through mergers and acquisitions (M&A). Loar Holdings is projected to have around $640 million in M&A capacity extending through 2026.
Loar's margins were noted to be competitive within the aerospace aftermarket (AM) sector, and RBC Capital expects that the company will continue to prosper due to the limited availability of high-quality AM stocks in the market. The analyst's commentary underscores the firm's confidence in Loar Holdings' performance and its strategic position within the aerospace industry.
The Outperform rating suggests that RBC Capital anticipates Loar Holdings' stock will perform better than the average return of the stocks that RBC Capital covers. The price target of $60.00 implies a significant level of confidence in the company's ability to grow and deliver value to its shareholders.
InvestingPro Insights
Loar Holdings Inc (NYSE: LOAR) has caught the attention of RBC Capital with its strong aftermarket profits and potential for growth. The latest data from InvestingPro supports this optimistic view, showing a robust gross profit margin of 48.59% for the last twelve months as of Q4 2023, which is indicative of the company's ability to maintain profitability on its sales. Additionally, Loar has seen a significant return over the last week, with a price total return of 9.87%, signaling a bullish trend in investor sentiment.
According to InvestingPro Tips, the company's liquid assets exceed its short-term obligations, providing financial stability and the ability to meet immediate liabilities. However, it's important to note that Loar is currently not profitable over the last twelve months, and is trading at high valuation multiples across EBIT, EBITDA, and revenue. Moreover, the stock's RSI suggests it is in overbought territory, which could indicate a potential pullback or consolidation in the near term.
For investors looking for deeper insights, there are additional InvestingPro Tips available, which can be accessed at https://www.investing.com/pro/LOAR. To enhance your investment strategy with these insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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