Tuesday, Deutsche Bank reiterated its Buy rating on Option Care Health stock(NASDAQ:OPCH) with a steady price target of $36.00.
The firm expressed confidence in the company's ability to grow its EBITDA at a low double-digit rate, despite potential gross margin pressures from a changing mix of business. This optimism is rooted in the company's history of meeting or exceeding its initial fiscal year EBITDA guidance since 2019.
Option Care Health has experienced significant volatility over the last year, leading to bearish skepticism regarding the company's guidance. Concerns have been raised that external factors may be obscuring underlying issues with the company's growth strategy. Nonetheless, Deutsche Bank's analysis suggests that strong gross profit growth, aided by administrative expense leverage, will support the company's financial performance.
The investment firm's positive outlook is further based on management's consistent track record of transparency and delivering financial results that surpass their initial yearly EBITDA projections. According to the analyst, this reliability will likely benefit investors as current market apprehensions are deemed to be overly reflected in Option Care Health's valuation. The company's stock is currently trading at approximately a 20% discount to its historical median multiple.
Looking ahead, Deutsche Bank identified the forthcoming first-quarter earnings as a potential catalyst for Option Care Health. A better-than-expected earnings report, coupled with an upward revision in guidance, could deflate the bearish perspective and trigger a relief rally in the stock. The analyst anticipates that a positive earnings surprise could pave the way for multiple expansions, given the stock's current discount to its historical valuation.
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