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BofA raises Signet shares target, keeps Neutral rating By Investing.com

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On Thursday, Signet Jewelers (NYSE:) saw its price target increased by BofA Securities from $100 to $115, while the firm maintained a Neutral rating on the stock. The adjustment follows Signet’s updated financial guidance and the anticipated impact of the company’s capital structure changes.

The revised price target is based on a 5x EV/EBITDA multiple applied to the new capital structure. BofA Securities’ analyst cited the conversion and purchase of outstanding preferred shares throughout the year as a key factor for the revision. As a result of these transactions, the firm has raised its fiscal year 2025 and 2026 earnings per share (EPS) estimates for Signet by 9% and 16%, respectively, to $10.31 and $11.78.

Signet recently updated its fiscal year 2025 EPS guidance to a range of $9.90 to $11.52, which is an increase from the previous range of $9.08 to $10.48. This updated guidance represents a 9.5% rise at the midpoint. The guidance improvement is attributed to the purchase of half of the remaining securities and an amended agreement that enables the company to buy back the rest throughout the year.

BofA Securities now assumes that Signet will convert and purchase the remaining preferred shares by the third quarter. This assumption is reflected in the raised EPS estimates and contributes to the rationale behind the higher price target. Signet’s proactive approach to managing its capital structure and the positive adjustment in guidance have been recognized in this updated financial outlook.

InvestingPro Insights

As Signet Jewelers (NYSE:SIG) navigates through its capital structure changes, insights from InvestingPro highlight several key factors for investors to consider. The company’s management has been actively buying back shares, signaling confidence in the company’s value. Additionally, Signet holds more cash than debt on its balance sheet, providing financial stability and flexibility. This aligns with the company’s recent actions to update its financial guidance and manage its capital structure proactively.

InvestingPro data shows a market capitalization of $4.65 billion and a low P/E ratio of 6.02, suggesting that the stock could be undervalued. The company’s PEG ratio stands at an incredibly low 0.04, which could indicate potential for growth not yet reflected in the stock price. Despite a decrease in revenue growth over the last twelve months, Signet maintains a robust gross profit margin of 39.4%, highlighting efficient operations.

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