Market underestimating Hays growth potential, says Barclays
By Michele Maatouk
Date: Thursday 09 Sep 2021
(Sharecast News) - Barclays upgraded shares of Hays to 'overweight' from 'equalweight' on Thursday and hiked the price target to 195p from 120p as it argued the market is underestimating the recruiter's growth potential.
The bank said that data from Revelio Labs shows high demand for new digital/IT roles across multiple sectors, which helps drive its forecasts around 10% ahead of Bloomberg consensus in FY23.
It also said that SG&A cost savings imply conversion margins of more than 250 basis points higher longer term, and the pandemic has created productivity improvements for net fee per head that can persist.
Barclays said it sees potential for cash returns worth more than 25% of the current market cap over the next five years, giving the shares a total dividend yield of about 5%.
The bank sees further upside to the target price if management can reiterate pre-pandemic growth ambitions, implying earnings more than 25% ahead of Barclays' outer year estimates.
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