Product testing, inspection, and certification group Intertek PLC (LON:ITRK) got a clean bill of health today from broker Goldman Sachs, which upgraded its rating for the stock to ‘buy’.
The broking giant said it sees a recent de-rating by the FTSE 100-listed firm’s shares as “a good entry point”.
It also raised its 12-month price target for the stock to 4,350p, from 4,260p previously, after minor revisions to estimates.
Intertek shares were up around 1.5%, or 48p to 3,300p in late morning trading today.
In a note to clients, Goldman’s analysts said they believe that the firm’s compound average earnings per share growth rate could be around 5% for the period from 2017-20.
They added that they believe that could triple to 15% if Intertek “executes well on M&A, and drive potential consensus estimate upgrades.“
The analysts said they “see scope for more cash deployment via M&A into the higher-growth and higher-margin Products division, which would reduce exposure to the cyclical Resources segment.”
They added: “Given the lower level of organic growth as well as consolidation opportunities in the sector, we think Intertek could shift its focus towards total constant currency growth rather than just organic growth. “
Goldman’s move follows on from a double-upgrade in rating by fellow US broker Jefferies International in October.
Rather than a typical move from ‘sell’ to ‘hold’ Jefferies upped its stance straight to ‘buy’ with a 43% jump in its target price to 4,300p.
The broker also thought Intertek’s profits will grow faster than revenues, while strong free cash flow will mean mergers & acquisitions could confidently be included in its forecasts.
In October, Intertek bolted on EWA-Canada, a cyber security firm focused on the internet of things and Jefferies said it expected more of the same.