PPG Industries(PPG-NYE) BMO upgrades to Outperform on earnings recovery

STA Research
by: STA Research

BMO Capital Market’s analyst John McNulty upgraded PPG Industries to Outperform from Market basing the upgrade on  his recent meeting with PPG’s management  which indicated the potential for earnings to recover during the second quarter 2020 and beating expectations for next year. McNulty also increased his target on the stock to $125 from $121 citing improving markets, increased cost cutting and improvement to cash flow. The analyst states “PPG offers some of the greatest balance sheet strength and cash flows of any name in the space, which will provide downside protection in case of a resurgence in COVID-19”.

 PPG’s average Wall Street analyst rating is Bullish.

STA Research(stocktargetadvisor) has a average target of $110, and a consensus Buy rating.  STA’s view of the stock is Neutral with a score of 5.3 out of 10, where 0 is very bearish and 10 very bullish.

What to like:                                                                                                                                    High market capitalization This is one of the largest entities in its sector and is among the top quartile. Such companies tend to be more stable. Low volatility The stock’s annual returns have been stable and consistent compared to its sector peers(for a hold period of at least 12 months) and is in the top quartile. Although stability is good, also keep in mind it can limit returns. Superior return on equity The company management has delivered better return on equity in the most recent 4 quarters then its peers, placing it in the top quartile. Superior capital utilization The company management has delivered better return on invested capital in the most recent 4 quarters than its peers, placing it in the top quartile. Superior return on assets The company management has delivered better return on assets in the most recent 4 quarters than its peers, placing it in the top quartile. Positive cash flow The company had positive total cash flow in the most recent four quarters. Positive free cash flow The company had positive total free cash flow in the most recent four quarters. High Gross Profit to Asset Ratio This stock is in the top quartile compared to its peers on Gross Profit to Asset Ratio. This is a popular measure among value investors for showing superior returns in the long run.

What to not like:                                                                                                                           Below median total returns The company has under performed its peers on annual average total returns in the past 5 years. Below median dividend returns The company’s average income yield over the past 5 years has been low compared to its peers. However, it is not a problem if you are not looking for income. Overpriced compared to book value The stock is trading high compared to its peers median on a price to book value basis. Overpriced on cashflow basis The stock is trading high compared to its peers on a price to cash flow basis. It is priced above the median for its sectors. Proceed with caution if you are considering to buy. Overpriced on free cash flow basis The stock is trading high compared to its peers on a price to free cash flow basis. It is priced above the median for its sectors. Proceed with caution if you are considering to buy. Low Earnings Growth This stock has shown below median earnings growth in the previous 5 years compared to its sector Low Revenue Growth This stock has shown below median revenue growth in the previous 5 years compared to its sector

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