Smiths News valuation is too low, says Peel Hunt
The valuation of Smiths News (SNWS) is ‘simply too low’ given its strengths, says Peel Hunt.
Analyst Christopher Bamberry reiterated his ‘add’ recommendation and target price of 52p on the newspaper and magazine distributor, which closed up 2.9% at 28.5p on Thursday.
A recent update from the group shows it is trading ahead of expectations, with pre-tax profits now expected to be not less than £40m, leading Bamberry to increase his earnings per share expectations for the year by 6%.
‘Although its end market is in steady – predictable – structural decline, we believe that the 2.8x full-year 2023 price/earnings multiple is simply too low given Smiths’ excellent track record of efficiency improvements, cash generation and the dividend yield of 14.9% underpinned by a free cashflow yield of 24.4%,’ he said.