RBC cuts Fineos stock PT to AUD1.70, remain cautious with Sector Perform rating By Investing.com

On Monday, RBC Capital adjusted its stance on Fineos Corporation Holdings plc (FCL:AU), reducing the price target to AUD1.70 from the previous AUD2.30. The firm maintained its Sector Perform rating on the stock.

The revision follows Fineos’ financial results for the first half of the fiscal year 2024, where the company reported a modest revenue increase of 1.5% compared to the prior corresponding period (pcp). This figure fell short of the consensus estimates by 4%, as the departure of legacy customers largely negated the impact of new client acquisitions.

Despite cost reduction efforts leading to a 57% rise in EBITDA over the pcp, the company still did not meet market expectations, which were set 16% higher.

Fineos’ free cash flow (FCF) was positive at €6.6 million in the first half of the year. However, the company typically experiences lower FCF in the second half due to working capital seasonality. Even with this trend, Fineos has reaffirmed its revenue guidance for the year, though achieving the mid-point of this guidance will require a stronger second-half performance, with a 52% skew compared to the approximately 50-50% skew observed over the last three years.

The analyst from RBC Capital expressed a cautious stance, indicating a conservative forecast towards the lower end of the company’s guidance. The new price target of AUD1.70 reflects this cautious outlook and is informed by the company’s recent performance and future revenue expectations.

InvestingPro Insights

Analyzing the latest data for Fineos Corporation Holdings plc (FCL:AU), some critical metrics stand out that may interest investors. With a market capitalization of $307.23 million, the company holds a negative P/E ratio of -19.59, which is adjusted to -16.9 for the last twelve months as of Q4 2023. This suggests that investors are expecting future earnings growth despite the company not being profitable over the past year. The price to book ratio for the same period is 1.87, indicating that the stock may be reasonably valued in terms of its assets.

Fineos’ revenue for the last twelve months as of Q4 2023 stood at $134.95 million, with a slight quarterly revenue growth of 2.73%. However, the annual revenue growth rate was down by -3.94%, reflecting some of the challenges the company has faced. Despite this, the company’s gross profit margin remains high at 71.53%, which is a positive sign of its pricing power and cost control.

From an investment standpoint, according to InvestingPro Tips, Fineos is currently trading near its 52-week low, which could present a buying opportunity for long-term investors. Additionally, the company’s liquid assets exceed its short-term obligations, showcasing a strong balance sheet. However, it’s worth noting that analysts do not expect the company to be profitable this year, and Fineos does not pay a dividend, which may be a consideration for income-focused investors. For those interested in a deeper analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/FCL, which could provide further insights into the company’s financial health and stock performance.

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