On Monday, Sotera Health (NASDAQ:SHC) received an upgrade from Jefferies, with the firm's analyst moving the rating from Hold to Buy. Accompanying this upgrade, the price target for Sotera Health's shares was also raised to $15.50, up from the previous $15.00.
The upgrade was influenced by a positive turn in three significant areas that had previously impacted Sotera Health's performance. These include increased medical technology volumes benefiting Steri/Nelson, which accounts for two-thirds of the company's revenue, a recovery in the life sciences macro environment, and a moderation in interest rates.
The analyst noted that if the life sciences sector returns to historical growth rates, it could lead to a substantial upside for Sotera Health. Additionally, the company's reaction to litigation news from Los Angeles was deemed to be an overreaction, based on the firm's analysis.
Jefferies has based its valuation on a multiple of the forecasted 2025 free cash flow of Sotera Health's peers, while also subtracting a quantified estimate of the company's litigation exposure. This approach underpins the revised price target of $15.50 and the upgrade to a Buy rating.
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