The German Bank Berenberg has upgraded builder’s merchant Travis Perkins (LON:TPK) to ‘buy’ and marked it out as one of its Alpha investments - that’s a stock with the potential to advance at least 25%.
The price target of 1,800p means Travis just about makes it onto the list based on a share price of 1,445p when the Berenberg 'buy' note was penned.
The current valuation offers a ‘good entry point’ for investors looking to take a position in the owner of DIY chain Wickes.
Berenberg thinks the group is well placed to compete and outperform its rivals, making market share gains.
Self-help measures at the plumbing and heating division should get that operation back on the road.
But Berenberg cautioned: “We expect further branch closures and a review of the customer proposition, with an emphasis on online and the introduction of a broader range.”
Revisiting its forecasts, the bank has raised its earnings per share predictions for 2017 and 2018 by 11% and 8.5% respectively.
It also pointed out the stock is currently trading on an earnings multiple of just over 11-times - or put another way a discount of around 11% to its peers.
While 2017 is likely to be tough year because of cost pressure from inflation and a mixed outlook “this is well known and in our numbers”, Berenberg said.
Of the 12 analysts logged as following Travis Perkins, eight are in the ‘buy’ camp along with Berenberg. Only one has a ‘sell’ recommendation, while the remainder see the stock as fully valued.
At 10am, Travis was changing hands for 1,477p, up 2.5%.