Deutsche Bank has upgraded its stance for mid cap insurer esure Group PLC (LON:ESUR) to ‘buy’ from ‘hold’, highlighting strong growth and compelling value.
The German bank also raised its target price for the FTSE 250-listed firm to 315p from 290p, with the stock currently trading at 229.8p, down 0.4% on Tuesday’s close.
READ: esure blames ‘Beast from The East’ for rising costs in UK insurance business
In a note to clients, Deutsche Bank’s analysts noted that esure shares have underperformed the wider insurance sector by 6% in the year-to-date, driven by concerns over motor insurance pricing and uncertainty following the departure of its CEO.
They added: “Though we have lowered our near-term forecasts to reflect the first of these factors, we think the shares nonetheless offer compelling value at current levels”.
The analysts said they expect the Shelia's Wheels motor insurance brand group to deliver earnings growth of 14% per annum out to 2020, while also sustaining a high 70% dividend payout ratio.
They concluded: “Now trading at just 9.3x 2019e earnings (35% below peers) and with an average yield over the next three years of 7.5% pa, we lift our recommendation to Buy.”