UPDATE: Deutsche Bank Initiates Coverage on Roundy's on Mixed Factors
In a report published Thursday, Deutsche Bank analyst Karen Short initiated coverage on Roundy's (NYSE: RNDY) with a Hold rating and $8.50 price target.
In the report, Deutsche Bank noted, “We are initiating coverage of RNDY with a Hold rating and an $8.50 price target. Our price target values the stock at an EV/EBITDA of 5.5x and a P/E of 10x. We have a Hold rating on the stock for a number of reasons: 1) ROIC has been in decline since RNDY's Feb. '12 IPO; 2) valuation contracted slightly from 2Q12 to 4Q12, but has since expanded meaningfully, despite continued deterioration in ROIC; 3) as a result, the relative valuation multiple has expanded. However, we do believe Mariano's EBITDA contribution will begin to more meaningfully offset erosion in the core business, so see little risk of a dividend cut going forward and as a result see little downside to the name.”
Roundy's closed on Wednesday at $8.91.
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