The trading update from discoverIE Group PLC (LSE:DSCV) was "encouraging" as, despite the slightly weaker sales than expected, "all the key growth drivers are pointing in a positive direction", said analysts at Stifel.
Third-quarter results were "solid ... in what are still very mixed demand conditions, while establishing strong foundations for a return to stronger growth next financial year", they added.
Full-year guidance was maintained, by the company, which said it made good financial and strategic progress in the period.
While sales were dented by customer destocking, year-to-date sales were up 1%.
Positive key growth drivers identified by Stifel included sales returning to organic growth in Q4, orders returning to growth in Q3 for the first time in over a year, design wins accelerated to 25%, M&A looked promising with a full pipeline, and at reducing multiples implied by a recently closed small bolt-on deal.
"Given all this, and despite the slightly weaker than expected sales performance in the period, we think that this in an encouraging update, and further reinforces our optimism on the growth outlook for next fiscal year and beyond," Stifel said.
In a separate note, house broker Cavendish reiterated its view that discoverIE’s growth strategy to focus on long-term, structurally growing markets across Europe, North America and Asia, and a diversified customer base "will progressively drive the shares to new highs".
Cavendish has an 1110p share price target versus the last closing price of 760p.
Another house broker, Peel Hunt, which has a target of 1,000p, said it was cutting its revenue forecast by £10 million mainly due to currency shifts but reiterated its 'buy' recommendation.
"Despite this, with continued strong gross margins and tight cost control, we leave profits for the year unchanged, resulting in a 30bp increase in the underlying operating margin to 12.8%."