On Monday, Mizuho Securities adjusted its forecast for Civitas Solutions (NYSE:CIVI), increasing the stock's price target to $90 from the previous $86, while maintaining a Buy rating on the shares. The decision comes as Civitas Solutions shows promising early results following significant acquisitions in the Permian Basin during the second half of 2023.
The firm's analysts have revised their Net Asset Value (NAV) model and financial projections for Civitas Solutions to account for year-end 2023 reserves, updated type curves, and the company's guidance for 2024.
These updates reflect Civitas Solutions' successful initial execution post-acquisition and the potential for further improvements in capital efficiency, which are not yet included in the current guidance or the firm's forecasts.
Despite the company's substantial progress in transforming its portfolio, Civitas Solutions' stock is still trading at a considerable discount compared to its small to mid-cap exploration and production (E&P) peers when looking at free cash flow to enterprise value (FCF/EV) and enterprise value to earnings before interest, taxes, depreciation, and exploration expenses (EV/EBITDX) ratios.
Mizuho Securities believes this undervalues the significant changes taking place within the company.
The firm reasserts its Buy rating for Civitas Solutions and identifies the stock as a Top Pick, signaling confidence in the company's trajectory and the value it presents to investors. The raised stock price target to $90 reflects the firm's updated evaluation of Civitas Solutions' assets and performance prospects.
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