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How Acuity Brands’ Year-to-Date Returns Stack Up

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Analysts’ recommendations

Among the ratings listed in Bloomberg, seven analysts have “buy” recommendations, and four have “hold” recommendations on Acuity Brands (AYI).

The stock’s average 12-month target price has risen from $250 at the beginning of the year to $282.13 as of September 21, 2016. Compared to Acuity’s current market price of ~$258, this represents a return potential of 9%. Among major banks (IYF), Goldman Sachs (GS) has a target of $300 on the stock. In January 2016, the bank had a target of $250 on the stock.

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Acuity Brands’ YTD returns

Investors who took positions in Acuity Brands’ stock at the beginning of the year would have made 10.9% on their investments by September 21. During the same period, the S&P 500 fetched 7.3% in capital gains.

Some of AYI’s competitors’ returns have been mixed. Hubbell (HUBB) has achieved year-to-date (or YTD) returns of just 2.7% as of September 21. After the Federal Reserve again decided not to raise interest rates, stocks rose across industries on September 21, and Hubbell benefited as well. Excluding that day’s return, the company’s returns have been poor at just 0.8%. At 16.3% and 23%, the YTD returns of Phillips (PHG) and Eaton (ETN) were the best.

Pricing multiple

Acuity Brands’ attractive fundamentals are reflected in its pricing multiple. The company is trading at a trailing price-to-earnings (or PE) multiple of 38x, higher than its five-year average of 30.2x.

The company has been growing in the double digits for at least the last ten quarters, and its rich multiple is largely a consequence of its growth index. 

At 18.76x, competitor Hubbell is trading very close to its five-year average multiple of 18.44x. The highest PE multiples for Hubbell and Acuity Brands in the last five years have been 23x and 42.9x, respectively.

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