Peel Hunt has upgraded S&U PLC (LSE:SUS) to 'buy' from 'add' with a 2,460p price target, saying the motor finance and specialist lending group's shares have weakened to a point where the valuation no longer reflects the strength of its recovery.
The broker said the shares now trade at around 10 times forecast earnings for the year to January 2027 and at a price-to-tangible net asset value of just below 1.0 times, a level Peel Hunt views as undemanding given the momentum building across both divisions.
S&U's final results, covering the year to 5 February 2026, showed group pre-tax profit rising 33% to £31.8 million, marginally ahead of Peel Hunt's £31.1 million estimate, with earnings per share of 195p and total dividends of 115p declared for the year.
Advantage Motor Finance, the group's core division, delivered a 42% increase in pre-tax profit to £23.4 million, with loan advances 66% higher than the prior year and net receivables growing to approximately £317 million.
Peel Hunt highlighted the quality of that growth, noting that collections performance improved to 91% of amounts due from 86% last year, while the impairment charge fell sharply to £12.8 million from £33.2 million, reflecting the strengthened loan book following a period of regulatory disruption.
Aspen Bridging, S&U's property lending arm, grew pre-tax profit 22% to £8.8 million despite sluggish market conditions, with new lending of £212 million and net receivables increasing to approximately £180 million.
To fund continued expansion, S&U has extended its revolving credit facilities by £50 million to £280 million and is working on longer-term funding arrangements, with the potential for up to £100 million of additional investment in the current year.
Peel Hunt left its forecasts unchanged, continuing to expect pre-tax profit of £36 million and earnings per share of 217p for the year to January 2027.
The shares, up 9% in the past month, were steady at 2,019p mid-morning on Tuesday.