On Friday, Truist Securities adjusted its outlook on REX American Resources (NASDAQ:AREC) (NYSE:REX), increasing the stock's price target from $58.00 to $70.00. The firm has kept its Buy rating on the shares, noting the company's strong performance amid a challenging ethanol market.
REX American Resources has been acknowledged for its operational efficiency, which has led to a significant free cash flow of $90 million in the fiscal year and marked its second most profitable year since becoming a public entity 39 years ago.
Despite anticipating a year-over-year decline in EBITDA for 2024 due to tighter crush spread assumptions, Truist Securities remains optimistic about the company's prospects in the following years.
The analyst firm expects a turnaround starting in 2025, as REX American Resources is set to complete the expansion of its One Earth plant and begin to benefit from its carbon capture, utilization, and storage (CCUS) initiatives.
The company's immediate focus is expected to be on construction progress and obtaining necessary permit approvals. Truist Securities predicts that REX American Resources is on a solid path to commence operations of its expanded facility in early 2025. This strategic move is anticipated to contribute positively to the company's financial metrics and overall market performance.
The updated price target reflects the firm's confidence in REX American Resources' ability to navigate the volatile ethanol market successfully.
The company's financial discipline and strategic investments are seen as key drivers for the optimistic valuation and sustained Buy recommendation.
REX American Resources' commitment to expanding its operations and investing in carbon capture technology aligns with industry trends towards sustainability and environmental responsibility.
The stock's new price target of $70.00 represents Truist Securities' expectation of the company's growth potential and operational success in the coming years.
InvestingPro Insights
As REX American Resources (NYSE:REX) garners a revised optimistic price target from Truist Securities, a glance at real-time data and InvestingPro Tips can offer additional context for investors. The company's market capitalization stands at a robust $999.81 million, and it boasts a P/E ratio of 16.21, suggesting a reasonable valuation relative to its earnings. Notably, the company's P/E ratio has seen a slight increase to 16.57 when looking at the last twelve months as of Q4 2024. This could indicate a stable perception of the company's value over time.
Furthermore, the company's PEG ratio, which combines the P/E ratio with the expected earnings growth rate, is remarkably low at 0.14 for the same period, hinting at potential undervaluation considering future earnings growth. Additionally, REX American Resources' strong price performance is reflected in a 100.51% return over the past year, with a recent price close to its 52-week high at 96.09% of the peak value.
InvestingPro Tips highlight the company's healthy financial status, with liquid assets exceeding its short-term obligations and holding more cash than debt. Additionally, analysts predict profitability for the year, and the company has been profitable over the last twelve months. This aligns with the positive outlook presented by Truist Securities. However, it's worth noting that the company's stock is currently in overbought territory according to the Relative Strength Index (RSI), which could suggest a potential pullback in the near term.
For investors seeking a deeper dive into REX American Resources' financials and performance metrics, InvestingPro offers additional tips. With the use of coupon code PRONEWS24, investors can receive an extra 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking access to a comprehensive suite of tools and insights to inform their investment decisions.
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