Our target price of 132p per share is based on our DCF valuation. The key assumptions in our DCF model are a WACC of 8.9% (3.6% risk free rate, 4.5% ERP, and 4% debt premium); growth to perpetuity of 4.0%, terminal EBIT margin of 7.0%, capex-to-sales of ~18%, and a tax rate of 20%.  

We rate AML High Risk because of the shortage of cash flows to date to support the investment case, meaning shares could be volatile should it experience further earnings and or cash flow weakness. Upside risks to our target price include a stronger-than-expected dollar, continued strong consumer spending and demand for AML products, continued strong pricing power, rising EBIT margins, and any negative rate sentiment as global Central Bank rates peak.

Downside risks include a weaker dollar, higher than guided spending plans, weaker FCF and or delayed FCF break-even, higher-than-expected debt and higher interest rates could also increase interest costs, lowering earnings.