On Monday, Stifel maintained a Buy rating on Latham Group Inc. (NASDAQ:SWIM) shares and increased the price target to $7.00 from the previous $6.80. The firm's analyst highlighted the upcoming investor meetings, noting that they would feature Latham Group's CEO Scott Rajeski and CFO Oliver Gloe on Thursday, September 19th.
The meetings are anticipated to provide investors with a thorough primer on the company, including insights into the pool industry and Latham Group's financial valuation.
The analyst expressed confidence in the company's financial prospects, particularly in regard to the FY24 EBITDA trough—a reference to the lowest point in the company's earnings before interest, taxes, depreciation, and amortization for the fiscal year 2024. The increase in the price target reflects a modest premium to other residential-focused building product manufacturers, suggesting a positive outlook for Latham Group's market position.
The report also conveyed optimism about the company's potential to benefit from growth within the pool category. This growth is expected to be supported by a modest recovery in new pool construction and steady EBITDA margin expansion. The analyst's outlook is based on several factors, including the potential for stronger category growth, increased penetration of fiberglass pools, market share gains, and more comprehensive EBITDA margin improvement.
Stifel's revised stock price target and sustained Buy rating indicate a belief that Latham Group is well-positioned to outperform within its sector. The analyst's comments underscore a growing enthusiasm for the company's ability to capitalize on industry trends and deliver financial growth.
In other recent news, Latham Group has exhibited resilience amid challenging market conditions, as indicated by the company's Q2 2024 results. Despite a 9.6% decrease in net sales, the company managed to significantly increase its adjusted EBITDA margin by 400 basis points. This improvement is attributed to effective restructuring, cost management strategies, and lower raw material costs.
The acquisition of Coverstar Central is anticipated to enhance sales of automatic safety covers and improve margins, despite a projected 15% decline in new pool starts.
Furthermore, Latham Group's net income rose to $5.4 million, marking a substantial improvement from a loss in the previous year. The company also adjusted its full-year EBITDA guidance upwards by $15 million. These recent developments underscore the company's robust financial position, with $90.8 million in cash and $282.4 million in total debt.
Financial services firm Stifel maintained a Buy rating on Latham Group shares, raising its price target to $6.80 from the previous $4.75. The firm's analyst highlighted Latham Group's strong position in the pool construction industry, particularly in fiberglass manufacturing, as a key reason for the increased price target. Stifel believes that the market currently undervalues Latham Group's potential to benefit from the growth in the pool category, particularly in a more normalized business environment.
InvestingPro Insights
As Latham Group Inc. (NASDAQ:SWIM) approaches its investor meetings, real-time data from InvestingPro provides a detailed snapshot of the company's financial health and stock performance. With a market capitalization of $722.36 million and a high P/E ratio of 60.59, the company's valuation reflects investor confidence in its future earnings potential. This is further supported by a robust PEG ratio of 0.36, indicating that the market expects earnings growth to outpace the P/E ratio in the near term.
InvestingPro Tips highlight that analysts have revised their earnings estimates upwards for the upcoming period, signaling optimism in the company's financial trajectory. Moreover, the stock has experienced a significant return over the last three months, with a staggering 65.34% price total return, emphasizing a strong short-term performance that may interest investors looking for momentum plays.
For those seeking more comprehensive analysis, InvestingPro features additional tips on Latham Group Inc., providing investors with deeper insights into the company's financial outlook.
While the company's revenue has seen a decline of 14.66% in the last twelve months as of Q2 2024, Latham's gross profit margin remains healthy at 29.28%. This suggests that despite the revenue headwinds, the company has been able to maintain profitability. Moreover, with the company's stock trading at 93.63% of its 52-week high and analysts predicting profitability this year, the overall sentiment remains positive. Investors can access further details and tips on Latham Group Inc. by visiting InvestingPro.
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