LONDON (ShareCast) - (Sharecast News) - RBC Capital Markets downgraded its target price on Convatec to 210p from 240p on Monday after the medical equipment maker warned on profits and announced the departure of its chief executive.
RBC noted that this is Convatec's second warning since its IPO and said it was reducing its FY18-20 estimates to match management guidance. The bank changed its revenue growth assumption for FY18 to 0.1% from 3% and its EBIT margin assumption to 23.3% from 24.8%,

Despite the warning and its cautious stance on the stock, RBC said the share price reset has gone too far and highlighted the fact that Convatec is still a cash generative business with attractive qualities.

"We would remind investors that Convatec is still a highly cash generative business, and at the current share price is generating a free cash flow yield of over 7%, with a dividend yield of 3%," it said.

"With the performance wanting we would hope all options are now on the table to maximise shareholder value."

At 1555 BST, Convatec shares were down 33% to 150.30p after it said earlier in the day that it now expects full-year organic revenue growth to be flat to 1%, down from 2.5% to 3% previously. It also announced that chief executive Paul Moraviec was leaving the company.

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