By Michele Maatouk
Date: Wednesday 18 Sep 2024
LONDON (ShareCast) - (Sharecast News) - RBC Capital Markets initiated coverage of Marshalls on Wednesday with a 'sector perform' rating and 370p price target.
It noted that Marshalls outperformed the FTSE 250 by 10x and traded at 18x average price-to-earnings, a premium of around 40% to peers from 2013 to 2021.
RBC said earnings per share and return on capital employed increased by around 3x.
"Enter Marley, a transformational deal which coincided with a cyclical downturn in 2022. 2024e adjusted EPS is over 50% below 'normalised' levels," it said.
Marshalls bought pitched roof tile specialist Marley Group for £535m.
"Prior CEO Martyn Coffey departed and now we await a new midterm strategy. We think a pathway back towards pre-Marley ROCE and above market earnings growth is needed to justify prior valuation levels. Marshalls' premium remains in-tact despite lower adjusted EPS growth and ROCE."