On Wednesday, Morgan Stanley adjusted its outlook on Bright Horizons (NYSE:BFAM) Family Solutions Inc. (NYSE:BFAM), increasing the price target to $77.00 from the previous $75.00. The firm maintained its Underweight rating on the company's stock. The adjustment follows Bright Horizons' reported earnings, which surpassed expectations in the fourth quarter across all significant metrics. The company also provided revenue guidance that exceeded analysts' predictions, although its earnings per share (EPS) forecast was slightly below expectations.
The company's performance in the fourth quarter has led analysts to anticipate that investors will turn their attention to profitability in 2024, as revenue levels out and the Additional Child Tax Credit (ARPA) funding comes to an end.
"We expect investors to focus on profitability in '24 as revenue normalizes and ARPA funding has expired. We are 7% below the guidance midpt on '24 EPS. BFAM remains our highest conviction UW, PT to $77," said the analysts.
InvestingPro Insights
Following Morgan Stanley's updated outlook on Bright Horizons Family Solutions Inc. (NYSE:BFAM), insights from InvestingPro provide a deeper dive into the company's financial health and market performance. With a market capitalization of $6.1 billion and a high price-to-earnings (P/E) ratio of 81.19, Bright Horizons is trading at a significant earnings multiple. This is echoed in the adjusted P/E ratio for the last twelve months as of Q4 2023, which stands at 74.81, indicating a premium valuation by the market.
The company's revenue growth remains robust, with a 19.69% increase over the last twelve months as of Q4 2023, and a quarterly revenue growth of 16.26% in Q4 2023. However, the InvestingPro Tips highlight that Bright Horizons is trading at a high EBITDA valuation multiple, which, coupled with the high P/E ratio, suggests that the market has high expectations for the company's future earnings. Additionally, Bright Horizons does not pay a dividend, focusing instead on reinvesting earnings back into the company.
Investors considering Bright Horizons will find additional insights with InvestingPro, which offers a total of 9 InvestingPro Tips for BFAM, including an analysis of the company's profitability and debt obligations. For those looking to explore these tips further, they can find them at https://www.investing.com/pro/BFAM. To enhance their investment research, readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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