Credit Suisse stays at 'underperform' on Admiral Group, points to inflation and regulations
Analysts at Credit Suisse reiterated their 'underperform' recommendation on shares of Admiral Group in anticipation of slower growth, new regulations and accelerating inflation.
The Swiss broker estimated Admiral's organic vehicle growth rate at 4.1%, forecasting that it would decline to 1% in 2021 due to its relative pricing differential and more flexible policies elsewhere.
Its traditionally lower non-shopper rate of 14.1%, versus rivals on 16.9% also left it more exposed to the upcoming FCA pricing guidelines due to a lower ability to retain clients.
Then there were the fast increases in used car prices which in April had reached a clip of 8.1%.
Lastly, and from a valuation viewpoint, the insurer's shares were trading on a 2021 price-to-earnings multiple of 20.4, which was 2.1 standard deviations greater than their five-year average.
Its shares were also trading on a PE premium of two times versus sector peer Direct Line, the broker said.
Credit Suisse also kept its 310.0p target price for the shares unchanged.