Shares in Xaar PLC (LSE:XAR) have the potential to almost double in value, according to Panmure Gordon, which reiterated its 'buy' advice and 190p price target in the wake of the inkjet printing specialist's prelims earlier Tuesday.
Xaar, which posted a pretax profit of £2.9m, ended the year with £7.1m in the bank. Adjusted profits are forecast to fall this year to £500,000, before advancing to £3.9m in 2025.
For Panmure, the interesting element of the Xaar story is the improvement in EBIT margins on the back of improved revenues and cost-cutting, which are expected to expand to 5.5% in 2025. This is some way behind the 30% peak of 2013.
"Whilst not forecasting a return to this level, we calculate that every 100 basis point increase in the EBIT margin equates to an approximate additional £1m in EBIT illustrating material upside potential to our forecasts," Panmure said in a note to clients.
"As such, Xaar remains on the right track and with the management team having successfully re-engaged with the customer base we should start to see an uplift in earnings.
In afternoon trading the shares were changing hands for 103p each.