Goldman adds Capita to 'Conviction List', hikes price target
Goldman Sachs reiterated its ‘buy’ rating on shares of outsourcer Capita on Wednesday as it hiked the price target to 240p from 200p and added the stock to its 'Conviction List'.
Capita
13.32p
16:49 26/04/24
FTSE 250
19,824.16
16:59 26/04/24
FTSE 350
4,470.09
16:59 26/04/24
FTSE All-Share
4,423.59
17:14 26/04/24
Support Services
10,641.76
16:59 26/04/24
GS said the first-half results saw the company reach a trough in terms of organic revenue declines given the improving momentum on the order book, especially in the software division.
"With the UK elections now behind us, we think the macro overhang on the stock has been removed and focus should shift to the core equity story viz. growth driven by consulting-led, digitally enabled software solutions and services," it said.
"We see a return to positive organic growth and positive free cash flow generation in 2020 and, with the shares trading on circa 9% 2021E FCF yield versus Business Services at 6%, we see scope for a material re-rating as the company delivers on its transformation plan."
The bank said it expects to see a return to positive organic growth in the software division at the full-year results in March, with improving momentum in most of the other divisions, apart from government services.
"We also expect continued margin improvement across the divisions led by the restructuring programme, which also should support future FCF generation," it added.
At 1320 GMT, the shares were up 1.8% at 173p.