UPDATE: Stifel Upgrades The Advisory Board Company to Buy, Names $47 PT as Royall Acquisition Enhances Growth

In a report published Thursday, Stifel analyst Shlomo Rosenbaum upgraded the rating on

from Hold to Buy, and named a $47.00 price target. In the report, Stifel noted, “We are upgrading our rating on ABCO shares from Hold to Buy post the announcement of the Royall (higher education data and analytics company) acquisition last night (December 10). We believe Royall is a premium asset, and there is material growth synergy potential that is not factored into guidance. Additionally, the high debt load from the acquisition will likely preclude high-priced ‘capability' buys in the next 12-18 months, which should enable the company to finally show the underlying EBITDA margin growth. While we are still concerned that growth may not be as easy to come by in the legacy health care business, we are less concerned that the targeted mid-teens growth rate of the overall business will be revised downward in the next 12-18 months since 1) we think the growth potential from the acquisition could offset near-term growth challenges in the health care business, and 2) initial guidance implies that December sales trends (so far) support mid-teens 2015 revenue growth. We are establishing a $47 target price, reflecting 13.5x EV/2016E EBITDA ($189M).” The Advisory Board Company closed on Wednesday at $37.76.