CSS Industries Inc (NYSE: CSS) reported Thursday with better-than-expected sales, EBITDA and free cash flow for the fiscal fourth quarter, prompting an analyst at DA Davidson to conclude the stock has bottomed out.
Analyst Linda Bolton Weiser upgraded shares of CSS Industries from Neutral to Buy and lowered the price target from $24 to $19, as she reduced her target EV-to-EBITDA multiple from 6.5 times to 5.5 times.
The analyst had downgraded the shares following the Q3 print in February.
CSS Industries' free cash flow is expected to remain strong in fiscal 2019 at $20 million or $2.18 per share, rendering the FCF yield at a very attractive 13.5 percent, Bolton Weiser said in a Monday note.
Shares of the novelty and greeting card maker are undervalued and could move higher, the analyst said.
Bolton Weiser projects upside to her 5.5 times target multiple in the event that CSS Industries makes an acquisition that could improve its organic sales growth profile.
In Q4, organic sales exceeded expectations; the metric has improved in four consecutive quarters. Although the company looks for flat organic sales performance, Bolton Weiser said the secular shrinkage of retail inventory led it to guide to a 2-3 percent organic sales decline for fiscal 2019.
D.A. Davidson lowered its sales and EBITDA estimates.
" ... But with the stock's additional 23-percent decline since it gapped down on the Q3 report, we think the valuation at 4.5x FY20E EBITDA is too low given that fundamentals have not deteriorated further."
The Price Action
CSS Industries stock has lost about 35 percent in the year-to-date period.
How Amazon's Edging Closer To Retail, E-Commerce Dominance: Smart TVs
Munster: Amazon Leads In Automated Retail, A B Opportunity
Latest Ratings for CSS
|Jun 2018||DA Davidson||Upgrades||Neutral||Buy|
|Dec 2017||DA Davidson||Initiates Coverage On||Buy|
View More Analyst Ratings for CSS
View the Latest Analyst Ratings
See more from Benzinga
- Benzinga's Daily Biotech Pulse: Mylan's Neulasta Biosimilar Approved, Portola's CEO To Retire, Regenxbio To Join S&P SmallCap Index
- Pivotal Research: For Nielsen Holdings, The Reality Is Better Than The Perception
- Pivotal Downgrades WPP As Downside Risks Move To The Forefront
© 2018 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.