Morgan Stanley Sees Good Potential Upside for Vale SA

In a report published Thursday, Morgan Stanley analyst Carlos De Alba reiterated an Overweight rating and $17.50 price target on Vale SA (NYSE: VALE).

In the report, Morgan Stanley noted, “We see 23% potential upside to our price target, with a ~3:1 bull/bear skew. The stock trades at 6.1x 2015e EPS, or ~20% below its historical average. Further, with a ~6% 2015e dividend yield this year, we see a good buying opportunity at current levels. We forecast Vale's ROE will improve to 13% in 2014 from 10% in 2013, supported by management efforts to divest non-core assets and reduce costs. The stock has underperformed other major miners by ~14% in LTM and we believe such underperformance is unlikely to continue.”

Vale SA closed on Wednesday at $13.91.