On Monday, UBS maintained its Neutral rating on Birkenstock Holding plc (NYSE: NYSE:BIRK) while slightly increasing the price target to $52 from $51. The firm believes that the company has the potential to strengthen its position as a leading casual premium footwear brand and to grow its presence in non-core categories. Birkenstock's first-quarter report for 2024 bolstered this outlook, with the company demonstrating a solid performance that aligns with UBS's expectations.
Birkenstock's sales are projected to grow at a compound annual growth rate (CAGR) of 16% over the next five years, which is anticipated to be the primary factor driving a 21% five-year earnings per share (EPS) CAGR. Despite the positive forecast, UBS suggests that the current valuation of Birkenstock's shares, trading at 37 times the sell-side's current fiscal year one price-to-earnings (P/E) ratio, already reflects the upbeat outlook.
UBS acknowledges the high likelihood of Birkenstock achieving its EPS estimates but notes that there is limited potential for the EPS forecast to exceed expectations. This perspective contributes to the decision to maintain a Neutral rating on the stock. The slight increase in the price target to $52 is attributed to a €0.05 rise in the fiscal year 2026 EPS estimate and is based on around 24 times the €2.05 forecasted EPS for FY26, adjusted for foreign exchange rates ($1.09 EUR/USD).
The valuation of Birkenstock is considered to be on par with its industry peers when examining price-to-earnings, price-to-sales, and free cash flow yield metrics. The 24 times P/E multiple used in UBS's analysis is deemed appropriate given Birkenstock's high-teens EPS growth outlook. The firm's stance could change if new factors emerge that suggest an EPS upside not currently reflected in the stock's price.
InvestingPro Insights
As Birkenstock Holding plc (NYSE: BIRK) continues to make strides in the casual premium footwear sector, real-time data from InvestingPro offers additional insights into the company's financial health and market performance. Birkenstock's strong sales projections and UBS's updated price target paint a picture of a company with solid growth potential.
InvestingPro Data shows that Birkenstock boasts an impressive gross profit margin of 61.91% for the last twelve months as of Q1 2024, highlighting the company's ability to maintain profitability in its operations. Additionally, the company's market capitalization stands at $8.98 billion, reflecting its significant presence in the market. Despite a high earnings multiple with a P/E ratio of 106.03, Birkenstock's revenue growth remains robust at 26.75% over the last twelve months as of Q1 2024, indicating a strong demand for its products.
InvestingPro Tips reveal that analysts have revised their earnings upwards for the upcoming period, suggesting confidence in Birkenstock's financial trajectory. Moreover, the company is expected to grow its net income this year, further solidifying its position as a profitable entity. For investors looking for more detailed analysis and additional InvestingPro Tips, visiting https://www.investing.com/pro/BIRK can provide a deeper dive into Birkenstock's financials and market standing. Currently, there are 11 more InvestingPro Tips available, which could offer valuable insights for making informed investment decisions.
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