DFS Furniture PLC (LSE:DFS) was upgraded by UBS as the UK sofa retailer is seen entering a more favourable earnings cycle.
Order intake rose 10% in FY25, giving strong visibility for first-half FY26 sales, while cost savings of around £50 million delivered a year early support margins.
UBS forecast 5% revenue growth and 45% adjusted pre-tax profit growth in the 2026 financial year, driven by operating leverage and easing freight and FX pressures.
The broker sees the macro backdrop stabilising, with household income and mortgage approvals improving, and notes that DFS has gained over 400bps of market share since before the pandemic.
With leverage falling, free cash flow positive and a potential dividend resumption on the horizon, UBS argues the shares look undemanding at 4.8x FY26 EV/EBITDA and a 20% discount to peers.
The rating was upped to 'buy' from 'neutral' and the 12-month price target raised to 210p from 130p – implying 36% upside.