On Thursday, Stifel initiated coverage on Snam SpA (SRG:IM) (OTC: OTC:SNMRY) with a Buy rating and a price target of EUR5.90. The firm's valuation of Snam is based on a regulatory asset base (RAB) approach, which suggests a significant upside potential for the stock.
The price target of EUR5.90 per share represents a 21% potential increase from the current share price, indicating a positive outlook for the company's stock value. According to Stifel, the market is currently pricing Snam with an implied 5% EV/(RAB + equity associates) premium, while their target implies approximately a 21% premium.
Stifel's coverage on Snam reflects a broader analysis of the utility sector, with the firm also providing insights on Terna (BIT:TRN), another player in the industry. The analyst's RAB-based valuation for Terna results in a price target of EUR8.30 per share, which corresponds to a 23% EV/RAB ratio. This figure is relatively close to the current market price, which reflects an 18% ratio.
The initiation of coverage and the setting of a price target are based on Stifel's methodology for evaluating utility companies. The regulatory asset base approach considers the value of a company's regulated assets and the expected returns on these assets.
Investors and market watchers will likely monitor Snam's stock performance in the coming period to see if it aligns with Stifel's projections. The Buy rating and the price target set by Stifel offer a positive view of Snam's future market valuation.
InvestingPro Insights
To complement Stifel's bullish outlook on Snam SpA (OTC: SNMRY), InvestingPro data provides additional context for investors. The company's P/E ratio of 13.58 and adjusted P/E ratio of 11.55 for the last twelve months as of Q3 2024 suggest that the stock is trading at a relatively low earnings multiple, aligning with Stifel's view of potential upside.
Snam's impressive gross profit margin of 75.52% for the same period underscores its operational efficiency, which could contribute to the company's ability to generate value for shareholders. This is further supported by an InvestingPro Tip indicating that Snam operates with "impressive gross profit margins."
Additionally, Snam offers a substantial dividend yield of 5.36%, with an InvestingPro Tip noting that the company "pays a significant dividend to shareholders." This could be particularly attractive to income-focused investors, especially considering that Snam has maintained dividend payments for 23 consecutive years and has raised its dividend for 7 consecutive years.
For those interested in a more comprehensive analysis, InvestingPro offers 11 additional tips on Snam SpA, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.