On Tuesday, Evercore ISI began coverage on Axalta Coating Systems (NYSE:AXTA), assigning an Outperform rating and setting a price target of $47.00. The firm highlighted the company's leadership in Refinish and Mobility coatings and noted the significant changes that have occurred since Chris Villavarayan became CEO in November 2022. Evercore ISI pointed to Axalta's EBITDA growth of approximately 17% year-over-year in 2023 and anticipates a similar growth rate for 2024.
The company, which was spun off from DuPont (NYSE:DD) Performance Coatings in 2013, experienced some challenges in finding its direction before the pandemic, including three CEO changes in as many years and contemplation of a sale. However, the new CEO's rapid implementation of self-improvement initiatives has led to a boost in both the company's commercial performance and its stock, according to Evercore ISI.
Despite Axalta's improved fundamentals and reduced volatility going forward, its stock multiple has not expanded correspondingly. Axalta currently trades at 9.8 times next twelve months (ntm) EBITDA, which is approximately two turns lower than its competitor PPG (WA:IBSP), and more than three turns below peers with similar fundamental profiles.
Evercore ISI believes that consistent operational execution under the new management and the success of the formal A-Plan could initiate a gradual expansion of the stock's multiple. The firm suggests that even a modest one-turn expansion to 11 times their projected 2025 EBITDA of $1.2 billion would support a price target of $47 per share, representing a 17% upside from the last closing price.
InvestingPro Insights
Recent data from InvestingPro reinforces Evercore ISI's positive outlook on Axalta Coating Systems (NYSE:AXTA). The company's market capitalization stands at $8.62 billion, with a P/E ratio of 20.56 based on the last twelve months as of Q3 2024. This relatively low P/E ratio, especially when compared to the company's near-term earnings growth potential, aligns with Evercore's view that the stock's multiple has room for expansion.
InvestingPro Tips highlight that management has been aggressively buying back shares, which often signals confidence in the company's future prospects. Additionally, 15 analysts have revised their earnings upwards for the upcoming period, supporting the positive sentiment expressed in Evercore's analysis.
The company's strong financial health is evident from InvestingPro data showing that liquid assets exceed short-term obligations. This solid financial footing provides Axalta with the flexibility to pursue growth initiatives and weather potential market uncertainties.
Investors seeking more comprehensive insights can access 12 additional InvestingPro Tips for Axalta Coating Systems, offering a deeper understanding of the company's financial position and market performance.
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