- Omega Protein Corporation (NYSE: OME) shares have climbed 25 percent in the last three months, crossing the $18 mark for the first time on August 18.
- DA Davidson’s Eric M. Gottlieb upgraded the rating on the company from Neutral to Buy, while raising the price target from $15 to $21.
- The rating upgrade follows a press release by the company stating that it is seeking strategic alternatives, Gottlieb said.
Omega Protein’s latest press release revealed that the company is reviewing strategic alternatives to boost shareholder value. These alternatives include share buybacks, sale, merger, spin-off or other separation of a certain business, or a strategic transaction.
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The company indicates that it may pursue more than one strategy, and did not give any indication of which was preferable. Analyst Eric Gottlieb commented, “…the press release may have been in response to increased activist investor holdings in the stock.”
“Our sum of the parts analysis estimates that Omega could garner a $17-$26 price tag, which implies ~5.5x-8.0x FY16 EBITDA, a significant premium to the 5.4x FY16 EBITDA the stock is currently trading at,” Gottlieb wrote.
DA Davidson’s sum-of-the parts analysis values the Animal Nutrition business at $400-$570 million, representing a discount to industry comps. “We value the Human Nutrition segment at $120-$145 million, vs. the ~$125 million the company paid for the business’ components, excluding any additional investments made in the business,” Gottlieb added.
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