Melrose Industries PLC's (LSE:MRO, OTC:MLSPF) share price slump in the past three days has increasingly become “detached from fundamentals,” according to Citigroup analysts.
Shares in the aerospace manufacturer are down 20% over the past five days, largely contributing to a 15% fall over the year so far.
Highlighting a strong first-half profit, which increased by 62% to £247 million, and an unchanged profit outlook, Citi asked in a note: “What have we missed?”
“The only explanation for the market move (relative to peers) is jitters around cash,” the bank added.
Melrose reported a free cash outflow of £145 million for the six months to June earlier in August, saying that cash flow was expected to ramp up next year, given the effects of last year’s major restructuring were still in play.
Citi forecast that Melrose was currently trading on a free cash flow yield of greater than 8% for 2027 in the note, highlighting this was against peers’ of 5% to 6%.
“Looking ahead, we believe that there is a clear opportunity for rerating, particularly if management set a clear mid-term cash guide and lay out the path to achieving it,” analysts added.
Shares made a slight recovery on Tuesday, gaining 3.5% to reach 467.51p.