Melrose Industries PLC (LSE:MRO, OTC:MLSPF) is the biggest faller in the FTSE 100, down 5.1% at 484.40p after RBC Capital Markets moved the stock to sector 'perform' from 'outperform', explaining that even with fresh upgrades to its full-year outlook, the company's valuation looks in line with peers.
"The fundamentals remain very supportive - the business is growing well, we expect further earnings upgrades and a share buyback is set to start in October," RBC said.
"However, we think this is all 'known' now, even the [earnings per share] upgrade potential may not surprise the street given traditional management conservatism," RBC added.
Last week, Melrose upgraded its full-year guidance on the back of strong interim results.
"This issue is that even on our above consensus forecasts, the valuation looks to be more up with events," RBC suggested.
"The share is up [around] 50% versus its adjusted pre-Dowlais demerger level from April following a succession of positive targets and the new 2025 enterprise value-to-Ebita at 10.6 times is not far below the blended peer multiple at 11 times."
RBC has a price target of 540p, up from 525p.