Shares in Travis Perkins (LSE:TPK) may be languishing near 16-year lows, but analysts at Stifel think now is the time to pounce.
The broker has upgraded the construction materials group from 'hold' to 'buy', arguing that the risk-reward looks attractive for long-term investors willing to wait for a turn in the cycle.
It's a bold call. Earlier this week, Travis Perkins reported a 99% collapse in operating profit, a sharp drop in sales, and no clear signal on when demand might recover.
CEO Pete Redfern has stepped down due to ill health, the group is in restructuring mode, and analysts were left trimming estimates after weaker-than-expected guidance for 2025.
But Stifel is backing the turnaround story. Chair Geoff Drabble, they argue, has already started to steady the ship and should attract a strong replacement CEO.
The recent shake-up - including shutting Toolstation France and cutting costs in merchanting - gives the group a leaner base to build from once volumes return.
And that's key: If Travis can claw back the 15% of volumes lost since 2021, Stifel thinks earnings could double.
Its 750p price target - unchanged despite the grim results - implies almost 50% upside from current levels. On a break-up basis, the group’s freehold property alone supports a valuation of 820p per share, they estimate.
There are still clear risks. Competition is intense, especially from private equity-backed rivals. UK housebuilding remains under pressure.
And with no CEO in place, leadership stability is a question mark. But for patient investors, Stifel argues, the current price (at just over 480p) already reflects a worst-case scenario.
That analysis appears to gel with the sentiments of Deutsche Bank, which slashed its price target to 650p from 1,020p, maintaining its 'buy'.
"Fortuitously, the long-awaited cyclical upswing did not materialise through this period, affording the group more space and time to work through what looks like significant challenges," it said.
The market may need time to come around. Shares are still down nearly a third this year. But if sentiment turns and the UK construction cycle starts to improve, Travis Perkins could finally be set for a rebuild of its own.
The stock was off 2% at 501.5p, valuing the business at just £1 billion.