Investing.com — Barclays (LON:) upgraded Tomra Methods ASA to an “overweight” ranking on Friday, citing progress potential within the firm’s Assortment enterprise and diminished dangers in its Recycling and Meals divisions.
Shares of the Norway-based firm have been up 3.2% at 08:55 ET (13:55 GMT).
The brokerage raised its value goal for Tomra’s inventory to NOK 190 from NOK 165, reflecting an 18% upside to the corporate’s share value on the time of the report.
Analysts at Barclays flagged the rising adoption of Deposit Return Schemes throughout numerous markets as a key driver of progress for Tomra.
With new DRS laws set to be applied in nations like Poland, Spain, Portugal, and the UK over the following a number of years, Tomra’s Assortment phase is predicted to realize high-teens compound annual progress charges from FY2024 to FY2029.
This momentum positions the Assortment enterprise because the highest-value phase inside the firm.
Whereas the Recycling and Meals divisions have confronted latest headwinds, Barclays famous that earnings downgrades in these segments seem like truly fizzling out.
Moreover, the analysts pointed to Tomra Horizons, the corporate’s innovation-focused enterprise, as a supply of untapped potential.
Tasks like feedstock vegetation and textiles recycling are nonetheless in early levels however may grow to be important contributors to future earnings if efficiently scaled.
Barclays additionally anticipates robust monetary efficiency for Tomra, projecting income progress at 13% CAGR and adjusted earnings per share progress of 24% over FY2024 to FY2027.
The analysts flagged Tomra’s skill to capitalize on policy-driven sustainability developments, notably in Europe, as an element bolstering investor confidence.
Barclays acknowledged potential dangers, together with the inventory’s excessive valuation and its reliance on cyclical industrial efficiency. Nevertheless, they continue to be assured in Tomra’s progress potential, pushed by rising demand for round economic system options and stricter recycling laws.
