Shares Magazine has declared that "Companies don’t come much more unloved than Capita (CPI), whose shares are still down 70% this year and more than 90% below their 2015 highs, even though they have doubled from their October lows."
"The firm’s dramatic fall from grace came after repeated profit warnings due to provisions for poorly performing contracts and write-downs on assets and disposals. In retrospect, the inflated levels of accrued income and prepayments on the balance sheet should have been a warning that asset quality was deteriorating."
"After a £700 million rights issue in 2018 and a thorough review of underperforming contracts, the firm has made good progress although there is still more work to do."
"This year was set to be a pivotal period for Capita when it expected to see revenue growth and sustainable cash flow. Instead, the firm has had to manage its way through the crisis, although the pandemic has forced it to accelerate certain strategic decisions such as the sale of its Education Software Solutions business."
"Covid is likely to continue to negatively impact revenues and transaction levels, and the inflection to sustainable cash flow generation has been delayed by one to two years, but the firm continues to win local and central government contracts and a stronger balance sheet will improve market confidence."
"It’s clearly not a stock for widows and orphans but having made it through the pandemic Capita isn’t going bust, yet it trades on just six times 2022 earnings forecasts. It meets the definition of a value stock and could see further share price appreciation in the coming weeks and months if value remains in fashion, but this is one for brave investors only."
At the time that this article was published (03.12.2020) Capita's shares were 48.5p.
Capita is a consulting, digital services and software business, delivering innovative solutions to transform and simplify the links between businesses and customers, governments and citizens. a is a consulting, digital services and software business, delivering innovative sol