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UDG Healthcare on the mend as RBC Capital kicks off coverage with an ‘outperform’ rating

UDG shares have lost a third of their value over the past year, but RBC reckons the sell-off, while justified initially, has been overdone
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RBC has set a price target of 800p per share, 20% above where the stock currently sits

Mid-tier Canadian investment bank RBC Capital has initiated coverage of pharma marketing specialist UDG Healthcare PLC (LON:UDG) with an ‘outperform’ rating.

UDG shares have fallen by a third over the past 12 months, which RBC puts down to “headwinds to individual businesses”, although analysts there think the sell-off now looks “overdone”.

READ: UDG Healthcare sells non-core Aquilant division and reviews Ashfield business

“With improving profit quality mix only set to continue and visible tailwinds this looks like a good time to take advantage,” they wrote in a note to clients.

When UDG reports its full-year results at the end of this month, the number crunchers reckon they should show a 1.3% rise in underlying earnings (EBOT). Growth is then expected to pick up to 3.9% next year, before heading up to 8.5% in 2020.

The RBC analysts note that UDB trades at a 20% discount to its peers, but are convinced that valuation is set to improve. Alongside their ‘outperform’ rating, they have kicked off with an 800p price target – some 20% higher from where the shares currently sit.

In late-morning trading, the stock was up 2.6% to 660p.

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