MITIE Group PLC (LON:MTO) saw its shares shoot higher in late afternoon trading, boosted by an upgrade in rating from US broker Stifel to ‘buy’ from ‘hold”.
Around 3pm, the outsourcing group’s stock topped the FTSE 250 gainers, up 7.7% to 156.6p with Stifel maintaining its target price at 186p.
READ: Full-year profits fall at Mitie but boss says outsourcer ‘where it needs to be’
The broker’s analysts said they have taken another look at MITIE after the recent share price weakness, with the stock down 24% versus the FTSE All Share index in the year to date.
In a note to clients, they said: “Our fundamental view of the company is broadly unchanged – strategic transformation has proven more difficult than expected to date, the market backdrop is challenging and we are cautious on customers' willingness to pay a premium for a wider technology offering.”
“Despite this, the group's valuation is at 8-year lows, which we view as attractive for a business improving its proposition, tackling leverage head-on and set to deliver double-digit earnings CAGR.”
The Stifel analysts added: “Interim results in November could provide a near-term catalyst, with a greater drop-through of cost savings a key lever for improving investor sentiment.
“Further out we expect cash generation to step-up once working capital normalises and the costs of change decline.”