Jefferies upgrades Cranswick on track record for profitable inorganic growth
By Alexander Bueso
Date: Wednesday 15 Jun 2022
(Sharecast News) - Analysts at Jefferies upgraded their recommendation for shares of Cranswick from 'hold' to 'buy' on expectations for faster profit growth.
The change in tack followed the analysts' decision to shift their forecasting approach for the company to one based on marginal returns on capital or on new invested capital as it where.
In turn, the key for that change was Cranswick's "impressive (and undimmed)" track record on generating mid-teens pre-tax returns on the capital deployed towards inorganic growth.
Those growth initiatives included improving yields (e.g. Deboflex), capital expansion and de-bottlenecking, and greenfield category entry (e.g. the acquisition of Ballymena).
All told, the new approach indicated that Cranswick was capable of compounding profits by 6% per annum over the next five years, they said, or 150 basis points ahead of consensus estimates.
And yet the company's shares had lost a quarter of their value from their 12-month highs and its enterprise value-to-earnings before interest, taxes, depreciation and amortisation multiple had nearly halved.
Jefferies did however trim its target price from 3,810.0p to 3,650.0p.
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