Kainos Group PLC (LSE:KNOS) shares climbed after the IT services and software group was upgraded by Panmure Liberum, which argued that the market has overlooked improving trading momentum.
Shares in the FTSE 250 group have fallen more than 20% so far this year despite bookings rising 32% in the year to March 2026 and all three divisions expected to deliver double-digit organic revenue growth in the current year.
Analyst Andrew Ripper moved his rating to 'buy' from 'hold', with the unchanged target price of 1,040p comparing to the last close at 779p.
The shares, he noted, are trading on less than one times his expected two-year profit growth rate and at a discount to peers Softcat and Computacenter, despite faster forecast earnings growth.
Ripper said investor frustration has centred on Kainos' weak profit conversion, with margin pressures from higher UK National Insurance costs, bonus normalisation, contractor use and the company's Workday partnership weighing on earnings.
However, the analyst expects many of these headwinds to ease over the next two years.
He highlighted strong demand in Kainos's Digital Services division, where public sector contract wins doubled last year and support expectations for more than 20% organic growth.
Significant potential was also seen for the Workday software products business, which is targeting annual recurring revenue of £200 million by 2030.
Panmure's adjusted pre-tax profit forecasts were nudged up 3% to £75 million for 2027 and 5% to £84 million for 2028, marking the first profit upgrade from the broker after four previous revenue upgrades since September.
Kainos shares jumped 2.6% to 796p on Tuesday morning, a rare island of green in a sea of red for the global tech sector.
