JD Wetherspoon PLC (LSE:JDW) delivered “robust results” and a reinstated dividend this financial year, but analysts at Shore Capital Markets were also left scratching their heads as to why the stock is priced as it is.
Pointing out that Wetherspoon is a net seller of pubs with “normalising” sales trends, the broker's analysts said: “It is difficult to reconcile why Spoons should command such a premium rating to its pub peers; albeit it remains best-in-class.”
It also highlighted Wetherspoon’s leverage ratios, which at 3.5 times net debt to EBITDA, are “arguably higher than optimal".
However, the Shore Cap also mentioned that profit before tax was up 73% year on year, “which was consistent with market expectations albeit ahead of our forecasts and reflected the rebound in profitability from the second half last year”.
At 724.9p per share, this is all priced in, according to Shore Cap, thus a 'hold' rating is justified for now.
Broker Panmure Liberum concurred, giving the stock a 'hold' rating with an 800p price target.
Wetherspoon’s price-to-earning (PE) ratio currently stands at 19 times, according to London Stock Exchange Group data, although this is backward looking.
The stock was up 3.53p at 728.03p.