The Harvey Norman Holdings Limited (ASX: HVN) share price is pushing higher on Wednesday morning.
At the time of writing, the retail giant's shares are up 1% to $5.02.
Why is the Harvey Norman share price rising?
The catalyst for the rise in the Harvey Norman share price appears to have been a broker note out of Goldman Sachs this morning.
According to the note, the broker has upgraded the company's shares to a buy rating with an improved price target of $6.00.
Based on the current Harvey Norman share price, this implies potential upside of 19.5% over the next 12 months.
And with Goldman forecasting dividends per share of 36 cents in FY 2022, the potential total return increases to ~27% including dividends.
What did the broker say?
Goldman Sachs made the move on the belief that Harvey Norman is well positioned to capitalise on a stronger outlook for housing related categories such as consumer appliances and furniture.
The broker explained: "We expect the underlying growth outlook into the medium to remain ahead of the pre-pandemic averages for the home related categories. As a result of this, we expect margin execution to remain elevated for longer with EBITDA margin for FY24e expected to be at FY18 levels on a pre-AASB16 basis as the cycle eases. While this still implies FY24 EBIT being A$775mn vs. A$1087.3mn in FY21, the EBIT CAGR over FY19-24e is expected to be at +6.6%, including +7.4% for Australia."
Goldman believes this growth rate makes the Harvey Norman share price good value based on current multiples.
Its analysts said: "Adjusted for the property valuation, HVN currently trades at a FY22e P/E of 7.1x. This compares to a long-term average of 8.7x and a peer group median of 9.6x. Even on a pre-property adjusted basis, HVN is currently trading at a relative valuation discount of -59% on an Industrials ex financials basis vs. a longer term average of -14% and a 5 year average discount of -42%."
All in all, Goldman feels this makes Harvey Norman shares worth considering today.
