On Tuesday, Goldman Sachs (NYSE:GS) initiated coverage of Pluxee, a leading company in the employee benefits and engagement sector, with a Neutral rating and a 12-month price target of €30.5. This target suggests a modest 4% potential upside from the current level.
Pluxee has experienced significant growth in recent years, with an approximately 19% organic revenue compound annual growth rate (CAGR) from fiscal year 2022 to 2023. This growth has been largely driven by the favorable economic environment of higher inflation and interest rates. However, Goldman Sachs analysts forecast a shift in these economic conditions, anticipating that the benefits Pluxee has reaped from inflation will diminish and that rising interest rates will begin to pose a challenge to the company's Float Revenue.
Despite the expected decrease in macroeconomic tailwinds, Pluxee is predicted to continue its growth, albeit at a slower pace. Goldman Sachs projects an 8% revenue CAGR for Pluxee from fiscal year 2024 to 2028. This estimate is slightly lower than that of Pluxee's closest peer, Edenred (EPA:EDEN), which is expected to grow at approximately 10% according to Goldman Sachs estimates (GSe).
The outlook for Pluxee also takes into account the company's enhanced product offerings and commercial strategy. While the immediate macroeconomic factors such as inflation and interest rates are evolving, the company's underlying business strategies are expected to support its ongoing growth in the coming years.
InvestingPro Insights
As Pluxee navigates through changing economic conditions, it's worth noting that one of its peers, Edenred (EDEN), has some intriguing financial metrics and analyst insights. According to InvestingPro data, Edenred boasts a notable revenue growth of 30.08% over the last twelve months as of Q2 2023. This growth is complemented by a gross profit margin of 43.97%, indicating a strong ability to translate sales into profits.
However, Edenred's current P/E ratio stands at -9.79, reflecting a high earnings multiple when considering near-term earnings growth. This is in line with one of the InvestingPro Tips, which points out that Edenred is trading at a high P/E ratio relative to its near-term earnings growth. This suggests that investors may be paying a premium for the expected profitability of the company, which analysts predict will occur this year.
Furthermore, Edenred has demonstrated a commitment to shareholder returns, having maintained dividend payments for 13 consecutive years and raised its dividend for the last three consecutive years. This consistency could be a signal of financial stability and a shareholder-friendly policy, which may be of interest to investors seeking regular income.
For those considering a deeper dive into the financial health and future prospects of companies like Edenred, the full suite of InvestingPro Tips can provide additional insights. There are six more tips available for Edenred on InvestingPro, which can be accessed by using the coupon code "SFY24" to get an additional 10% off a 2-year InvestingPro+ subscription, or "SFY241" to get an additional 10% off a 1-year InvestingPro+ subscription.
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