Investing.com -- BofA Securities has upgraded Fluidra SA (BME: FLUI ) to a “buy” rating from “underperform", raising its price objective to €26 from €22, in a note dated Thursday.

Shares of the Spanish pool manufacturer jumped by 9.4% at 03:18 ET (07:18 GMT).

The upgrade reflects improving confidence in the company’s pricing strategy, ongoing margin resilience, and expectations that volume-related pressures in the New Build segment are now largely priced into the stock.

Shares of the pool equipment maker closed at €18.49, leaving room for over 40% upside to the revised price target.

Analysts at BofA said they now forecast organic growth of approximately 4% for FY25, up from a previous estimate of 2.4%. This increase is driven by higher pricing expectations as Fluidra looks to counteract the impact of tariffs through selective price increases.

The brokerage has already implemented price hikes of 2–3% in the U.S. last October and added another 3.5% increase in response to new China tariffs, contributing around 1.4% to overall revenue growth.

While the New Build market—which accounts for about 30% of Fluidra’s total sales—continues to face pressure, BofA believes current estimates adequately reflect these challenges.

They noted that even flat volume growth in the segment could still allow the company to deliver low single-digit group growth, given the strength of pricing.

In terms of margins, Fluidra has maintained performance despite volume headwinds. BofA expects this to continue, supported by the company’s Simplification program, which is expected to deliver €32 million in savings in FY25 and €100 million overall.

An enhanced version of the program, announced for 2026 to 2030, is set to generate an additional €120 million in savings, though around €85 million will be reinvested into the business.

The bank now models EBITDA margins of 24.4% for FY25 and 25.3% for FY26, slightly ahead of consensus expectations of 23.9% and 24.3%, respectively. EBITA forecasts have been raised by 6–9%, which supports the higher valuation target.

BofA said Fluidra’s stock is trading at 10x 2026 estimated EV/EBITA, compared to a historical average of 11x.

Given the company’s ability to maintain strong margins and pricing execution, analysts believe the stock deserves a 15% premium to its historical multiple—up from a previous premium estimate of 10%.

The stock has underperformed the STOXX Europe 600 Industrial Goods & Services index (SXNP) by approximately 14% over the past six months, a period marked by broader concerns over residential construction activity.

Analysts at BofA suggest this underperformance and current valuation present an attractive entry point, especially as investors shift focus toward high-quality names in a weakening macro environment.

Risks to the rating include a deeper-than-expected downturn in the residential construction market, weaker-than-expected price pass-through for tariffs, or failure to fully execute on cost savings under the Simplification program.

BofA’s revised model incorporates Fluidra’s Q1 pre-release, which showed €563 million in sales, reflecting 5% organic growth and 7% total sales growth.

The brokerage now expects around 5% organic growth through FY26 and FY27, driven primarily by price rather than volume, with Fluidra reaching its FY25 revenue target by FY27 instead.

Fluidra maintains a leverage ratio of 2.4x, expected to decline to 2.2x by the end of FY25. Free cash flow generation has averaged €250 million per year since 2019.

The company continues to prioritize organic growth, followed by M&A, dividend payments, and potential share buybacks. The dividend policy remains at 50% of prior-year cash EPS.