CDRE - Bank of America initiates Cadre at buy citing growth potential

Cadre Holdings ( NYSE: CDRE ) shares popped over 7% on Tuesday after Bank of America initiated coverage on the stock, with a buy recommendation and a $30 price target.

In initiating the coverage, BofA analysts said: "We believe that CDRE is a well managed company with a unique portfolio and with the capability to grow substantially over the next several years, primarily through industry consolidation. We expect meaningful earnings accretion through the company's M&A strategy and margin expansion plans. This, in combination with management's historical playbook used at Armor Holdings, should position the company well for growth."

Cadre ( CDRE ), which completed its initial public offering in Nov 2021, offers safety and survivability equipment for first responders, with products business being its primary source of revenue. Products comprised 80% of the firm's sales and nearly 90% of gross profit in 2021.

The bank expects the firm to "achieve 20% adjusted EBITDA margins by FY25 as management optimizes its cost structure, progresses on productivity initiatives, and acquires high margin businesses."

Furthermore, strong FCF generation is cited as key to Cadre's strategy that can help fund much of its current M&A strategy with the cash generated organically.

Bank of America's buy rating is in line with SA Authors' rating of buy.

CDRE shares have gained 75% over the past year and 7% YTD

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