On Monday, Scotiabank updated its outlook on FirstService Corp (NASDAQ:FSV) stock, increasing the price target to $190 from $175 while maintaining a Sector Perform rating.
The adjustment follows FirstService's second-quarter earnings surpassing expectations, prompting the analyst to revise the target based on a valuation multiple of 18.5 times the estimated 2025 enterprise value to EBITDA (earnings before interest, taxes, depreciation, and amortization). This valuation is consistent with the company's historical average.
FirstService, known for its property services, is anticipated to enter a phase of robust earnings growth over the next year and a half, driven by a rebound in organic growth and a strong mergers and acquisitions strategy.
The company's organic growth had averaged 2.5% over the past year amidst challenging comparatives, while earnings per share (EPS) growth had declined by an average of 7.5% year over year. However, the analyst projects a significant turnaround with an average organic growth of 6% and EPS growth reaching 17% in the coming six quarters.
The report points to a positive outlook for FirstService, suggesting that its growth trajectory is set to improve significantly. The company's recent performance and strategic initiatives appear to have laid the groundwork for accelerated earnings. The updated price target reflects the analyst's confidence in FirstService's ability to capitalize on market opportunities and deliver substantial growth in the near future.
In other recent news, FirstService Corp has been making notable strides in its financial growth. The company's second-quarter earnings exceeded expectations, supported by robust revenue and margin performance.
RBC Capital Markets responded to these results by raising the price target for FirstService from $187 to $192, while maintaining an Outperform rating on the company's shares.
The firm attributes this positive outlook to the company's strategic acquisitions, particularly in the roofing sector, which have significantly contributed to its organic growth rates.
FirstService's recent earnings call also revealed an impressive 16% increase in total revenues year-over-year, largely due to these acquisitions. The company's EBITDA rose by 12% to $132 million, achieving a consolidated margin of 10.2%.
FirstService Residential's revenues also grew by 8%, thanks to organic growth and the acquisition of CitiScape. The company has projected mid-teens percentage growth in consolidated revenues and EBITDA for 2023.
With these recent developments, FirstService continues to show promise in its financial performance. RBC Capital Markets anticipates an acceleration in earnings growth in the second half of 2024, reflecting their confidence in FirstService's growth trajectory. This optimism is based on the company's strong second-quarter results and the strategic benefits from recent acquisitions.
InvestingPro Insights
FirstService Corp's recent performance and the optimistic outlook provided by Scotiabank are echoed in some of the real-time metrics from InvestingPro. The company boasts a market capitalization of approximately $7.89 billion, underscoring its significant presence in the Real Estate Management & Development industry. Moreover, FirstService has demonstrated a commendable revenue growth of nearly 13% over the last twelve months as of Q2 2024, which aligns with the analyst's projection of a strong phase of earnings growth.
InvestingPro Tips highlight that FirstService has consistently raised its dividend for nine consecutive years, an attractive point for income-focused investors. Additionally, the company is trading near its 52-week high, indicating a strong market sentiment. However, it's worth noting that the stock is currently trading at a high earnings multiple of 97.85, suggesting a premium valuation. Investors looking for more in-depth analysis will find additional tips on InvestingPro, including insights on the company's debt levels, liquidity, and analyst revisions, which could further inform their investment decisions.
For those considering adding FirstService to their portfolio, or current shareholders looking to deepen their understanding of the stock, InvestingPro offers a comprehensive suite of tools and analytics. With the promo code PRONEWS24, investors can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, providing access to even more valuable insights. Currently, there are 16 additional InvestingPro Tips available, offering a wide range of information to help users make well-informed investment choices.
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