RBC Capital Markets has kept its 260p price target and outperform rating on IWG PLC (LSE:IWG), arguing the shares have lagged other cyclicals and now offer a decent entry point.
The target implies a total return of 43% against a share price of 183.1p.
IWG, the world's largest provider of flexible offices and the owner of the Regus and Spaces brands, missed first-half profit forecasts.
Earnings before interest, tax, depreciation and amortisation came in at $265 million, below RBC's $285 million estimate and a consensus figure of $288 million.
Revenues were ahead of expectations, but higher-than-expected overhead costs weighed on profit.
Free cash flow also came in below forecasts, reflecting timing around the year end and the rollout of automated invoicing software in the first quarter that cut payment days sharply.
Full-year guidance was reiterated, with overheads expected to fall by around £30 million in the second half.
Analysts Andrew Brooke and Karl Green said management appears very confident of delivering that improvement.
The managed and franchised division remains the key growth engine, with gross profit up 48% and a pipeline of new openings 31% higher.
Company-owned growth of 5% was better than expected, with stable gross margins.
RBC trimmed its earnings per share forecasts to reflect higher depreciation, a higher tax rate and increased interest costs following a €200 million increase in the group's Eurobond.
The bank expects the shift towards capital-light centres to drive a re-rating over time, with most of the resulting cash returned to shareholders.
