Brightview Holdings Has 14% Upside Potential, Stifel Says In Bullish Initiation

Brightview Holdings Inc BV is an appropriate stock for investors who can accept moderate returns in in the face of moderate risk, according to Stifel.

The Analyst

Stifel's Shlomo Rosenbaum initiated coverage of Brightview with a Buy rating and $25 price target.

The Thesis

Brightview's stock traded on the public market for the first time in late June; the company is roughly nine times bigger than its closest competitor in revenue terms and boasts an acquisition pipeline that represents around $200 million of EBITDA, Rosenbaum said in the initiation note. (See the analyst's track record here.) 

Brightview's already large size puts it in a position where it can pursue even more acquisitions at a faster pace, which should generate superior margins over the longer term, the analyst said. 

Stifel projects a 2-3-percent organic growth rate for Brightview, in-line with the industry average. M&A deals can lift the company's total growth rate to the mid-single digits, the analyst said. Investors can expect the stock to move higher over time, although seasonal fluctuations in weather could create volatility, Rosenbaum said.  

A realistic downside case is $20 per share, which implies a drop of around 9 percent but would still value the stock at a premium valuation versus some peers, the analyst said. 

The stock's risk-reward profile is "skewed somewhat upwards," and the shares have upside potential to $25 per share if future acquisitions generate incrementally higher accretion versus expectations, according to Stifel. 

Price Action

Brightview Holdings shares were trading higher by 0.91 percent at the time of publication Monday afternoon at $22.15. 

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