RBC Capital Markets has raised its price target for Diploma, the specialist distribution group, to 8,000p from 7,400p and kept its 'outperform' rating ahead of annual results.
The broker said market forecasts still look beatable.
It also argued the shares are unlikely to lose their premium rating, despite a high headline valuation and tough comparisons in the controls business.
Diploma reports results for its financial year on 17 November.
RBC expects strong growth to continue in the fourth quarter, with several end markets holding up well, particularly Controls.
Life Sciences is likely to be a tougher market.
The broker also expects an update on recent bolt-on acquisitions and the wider deal pipeline.
Outlook
RBC believes Diploma is comfortable with 2027 market forecasts.
It expects the company to flag a stronger first quarter before tougher comparisons kick in from the second quarter.
The broker nudged up its 2027 earnings per share forecast by 1% to reflect currency moves.
Valuation
The new target leaves about 3% upside, limiting room for further gains after a strong run in the shares this year.
Diploma trades at the top of the business services sector but broadly in line with other high-quality compounders and distributors.
RBC said the premium is justified by above-average organic growth, high and stable returns on invested capital, and upgrades to earnings.
From here, further gains will depend more on earnings growth than on the valuation rising.
RBC assumes Diploma spends about £300 million a year on acquisitions.
Its model values the existing business at about 6,200p a share and future deals at 1,800p.
The target has gone up; the gap to the share price has not.
