On Wednesday, Baird, a financial services firm, adjusted its outlook on Itron Inc. (NASDAQ:ITRI), a technology company specializing in energy and water resource management. The firm raised its price target on the stock to $115 from the previous target of $108 while maintaining an Outperform rating.
The new price target reflects Baird's confidence in Itron's strategic direction, as shared during the company's first Investor Day since 2021. The event showcased Itron's technological advancements and its shift towards a product mix with higher margins. Itron also presented its 2027 financial targets, which have been set without considering any potential mergers and acquisitions.
Baird's optimism is further supported by Itron's focus on investing in its Networks and Outcomes segments, areas that are expected to drive the company's growth in high-margin businesses. The analyst from Baird believes that the increasing complexity of the electrical grid positions Itron's technology advantageously in the market.
The valuation of $115 per share is based on approximately 19 times the firm's estimated 2027 enterprise value to EBITDA (earnings before interest, taxes, depreciation, and amortization), which is then discounted back to the end of 2024 at a 10% rate.
This multiple compares favorably to the median of around 18 times for metering companies, justifying the higher target given Itron's factors such as its domestic listing, robust backlog, exposure to diverse end markets, and an improving supply environment.
InvestingPro Insights
Following Baird's positive adjustment on Itron Inc. (NASDAQ:ITRI), current data from InvestingPro provides a deeper financial perspective on the company's performance and market position. With a market capitalization of $4.14 billion and a strong revenue growth of 21.06% over the last twelve months as of Q4 2023, Itron demonstrates solid financial health and growth potential.
The company's P/E ratio, as of the same period, stands at 32.77 on an adjusted basis, which indicates a high earnings multiple. This aligns with one of the InvestingPro Tips, which suggests that Itron is trading at a high earnings multiple. Such a valuation could reflect the market's expectations for future earnings growth, particularly in light of the company's strategic focus on high-margin businesses.
Additionally, Itron has experienced a significant price uptick over the last six months, with a 46.22% total return, and is trading near its 52-week high at 94.61% of the peak price. This price performance could be indicative of strong investor confidence and market momentum, as highlighted in another InvestingPro Tip.
For investors seeking a more comprehensive analysis, InvestingPro offers additional InvestingPro Tips, including insights on the company's debt levels, liquidity, and profitability projections. There are 11 additional tips available for Itron, which can provide further guidance on investment decisions. Interested readers can unlock these insights with a yearly or biyearly Pro and Pro+ subscription, using the coupon code PRONEWS24 to get an extra 10% off.
As Itron approaches its next earnings date on April 29, 2024, investors may want to closely monitor these metrics and tips to refine their understanding of the company's financial trajectory and market position.
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