Currys PLC (LSE:CURY) shares fell 6% on Monday to 117p after RBC Capital Markets downgraded the stock from 'outperform' to 'sector perform', arguing that the recent rerating has left limited scope for further multiple expansion.
RBC kept its price target at 140p. However, Currys now trades on around 11 times its estimated 2025 earnings, well above its five-year average of eight times.
RBC suggests that investors seeking valuation upside might consider peers such as B&M European Value Retail or Avolta AG instead.
The rapid rerating (from about 5.5 times earnings at the start of 2024 to double-digit multiples today) is the primary reason for the downgrade.
On the plus side, Currys sits on net cash of £184 million and has reduced its pension deficit to around £100 million on an accounting basis.
That financial strength should support the reinstatement of dividends and possible share buybacks by year-end.
Since late 2023, Currys has delivered a solid turnaround. Exiting its loss-making Greece business and sharpening its focus across the United Kingdom and the Nordics have helped drive profitability.
Management is targeting under-penetrated areas such as computing, mobile devices and health and beauty, while also growing higher-margin services and business-to-business sales.
Even so, the discretionary nature of its product range and relatively low operating margins mean that consumer sentiment and broader economic trends will remain critical to performance.
The shares, up 25% year to date, fell 7p to 117.3p.