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”.
“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.