Hays shed 2.9% at 177.1p and Pagegroup 4.5% at 441.9p on the downgrade to ‘sell’ from ‘hold’ by Deutsche (DB).
The bank said the shares have never traded on higher price/earnings ratios on earnings per share higher than their current levels, and it remains wary of de-rating risks.
“We see significant de-rating risk for the companies despite the strong data as unemployment rates move below previous floors in many countries,” DB said.
The target price for Hays has been moved to 155p, while for Pagegroup it has been moved to 380p from 430p.
If there is a downturn in 2019, the earnings risk is to the downside, DB’s analysts vouched.
“The companies do not have stretched balance sheets in our view and are paying special dividends; however, dividend yield is never defensive for a staffing and recruitment company in a downturn,” the analysts opined.