Fuller Smith & Turner PLC (AIM:FSTA) could deliver double-digit annual earnings growth for years to come, reckons Shore Capital, seeing the recent share price rally as not yet reflecting the pub group's strengths.
The broker reiterated a 'buy' rating and increased its earnings forecasts after Fuller reported stronger-than-expected results for the year to March.
Shore now forecasts earnings per share of 52.2p for the 2027 financial year, up 6% from previous estimates and representing growth of around 11% year-on-year.
Analyst Greg Johnson highlighted three drivers of future growth: like-for-like sales expansion, further margin improvement and additional capital deployment.
Like-for-like sales rose 4.4% in the first eight weeks of the new financial year, ahead of Johnson's full-year assumptions.
He believes there is further scope for profitability gains as cost pressures ease and management improves labour scheduling across the estate.
While managed pub EBITDA margins improved by 90 basis points to 21.6% last year, the broker's forecasts assume only limited additional progress.
The balance sheet is also strengthening, with Johnson expecting falling net debt to create capacity for further share buybacks, acquisitions or enhanced shareholder returns.
He estimates Fuller could have as much as £80 million of excess capital available by the 2029 financial year.
Property assets remain another source of value. Fuller's latest estate valuation implies a net asset value of 1,521p per share, compared with the current share price of around 682p.
With a target price of 1,000p, Shore sees 47% upside, while arguing the shares could ultimately be worth more than 1,100p on a two-year view.
