Over the next 6 years, LivaNova PLC shares will need to reach $94 to achieve average annual stock market performance of 9.0%. LivaNova PLC’s stock price will need to reach $110 by 2029 to achieve upper quartile performance. At the current price of $56, what are market expectations regarding LivaNova PLC’s future operating performance?
Executive Summary
- Key LivaNova PLC characteristics: below average financial strength, very low expected growth, low profitability, and low stability.
- High valuation, average shareholder returns. Current valuation levels are high relative to the LivaNova PLC Peer Group. Recent market returns have tracked the LivaNova PLC Peer Group. Total shareholder returns expected to significantly lag the overall equity market. Based on current investor expectations, LivaNova PLC shares should reach a level of $40 by 2029 — an -5.6% per year total shareholder return. A 2029 stock price of $94 would reflect median performance and a price of $110 would be required to reach upper quartile performance.
- LivaNova PLC’s achieved growth is modestly above average. Historical growth has been high relative to the LivaNova PLC Peer Group and forecasted growth is relatively below average. EPS Growth has been superior. This factor has buoyed market perceptions of LivaNova PLC. LivaNova PLC’s historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity.
- Pretax Margin, Pretax ROA, and Return on Equity are group lagging. These factors have negatively affected market perceptions of LivaNova PLC. The company has very high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
- LivaNova PLC’s risk profile is unfavorable. Overall variability has been very low with very low revenue variability, above average E.P.S. variability, Financial Strength is below average and earnings’ expectations are below average. The debt/capital ratio has risen.
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