Ashtead boosted as BofA Merrill highlights attractive growth
Ashtead got a boost on Wednesday as Bank of America Merrill Lynch upped its price target on the stock to 2,000p from 1,620p and reiterated its ‘buy’ rating.
Ashtead Group
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12:59 29/04/24
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The bank said Ashtead remains an attractive long-term investment opportunity, offering around 20% earnings per share compound annual growth rate for an attractive price-to-earnings rating of 12.6x to April 2018.
“The long-term growth story of structural and macro growth remains well entrenched with the added benefits of self-propelled growth fragmented markets and relatively placid competition,” Merrill said.
In addition, it argued that tax reform in the US could add 14% to 20% to EPS.
Merrill pointed out that Ashtead generates 92% of its earnings before interest and tax in the US and has a relatively low interest cost line.
“Therefore, the net benefit of a reduction in the corporate tax rate from 35% to 20% is material.”
Including the offset of disallowed interest costs against tax, it estimated that net benefit to full-year EPS could be around 14%. If the rate of tax was slashed to 15%, the benefit to EPS could be as high as 20% and this is not reflected in the shares, BofA said.
At 0947 GMT, the shares were up 2.5% to 1,707p.