Portfolio

Liberum cautious on durability of Covid boost for Dechra Pharmaceuticals

By Alexander Bueso

Date: Monday 01 Nov 2021

(Sharecast News) - Analysts at Liberum hiked their target price for shares of Dechra Pharmaceuticals but kept their recommendation at 'sell', telling clients that they struggled to justify such a lofty valuation.
In particular, the analysts questioned the sustainability of Covid-driven demand, which they said had lifted the entire companion animal market.

The day before, the veterinary pharmaceuticals and products specialist had turned in a solid set of full-year results, bolstered by a 26% surge in sales of Companion Animal Products.

And the company had seen a strong start to the 2022 fiscal year.

Hence their decision to raise their estimates and their target price with the latter rising from 3,110.0p to 3,960.0p.

Despite that "exceptional performance", the analysts said they could not justify a forward price-to-earnings multiple of 40.

They also noted that Dechra had flagged a softening in vet visits in the States.

Furthermore, market leader Zoetis was expecting trends to moderate, muddying the waters a bit when it came to the sustainability of the Covid-related boost to CAP.

Indeed, their new target remained some 20% below the actual share price despite factoring in sector-beating growth out to 2030 and moderating afterwards.

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