Credit Suisse today raised its price target on SThree (LON:STHR) after the staffing group reported a positive start to the new financial year.
Last week, SThree said its first quarter profits were up 15 percent to £47.7 million amid strong growth in placement fees despite continued weakness in the banking and finance market, which was offset by a strong performance in the energy and biotech sectors.
Analyst Andrew Grobler repeated his ‘outperform’ rating and raised his target price on the stock from 270 pence to 345 pence, a premium to Monday’s close of 305 pence, on the back of the report.
In addition, Grobler upped his earnings per share forecasts for 2012 and 2013 by nine and six percent respectively.
The analyst highlighted the increase in the permanent deal pipeline reported by SThree and the shift towards higher paid contractors and placements, which drove growth in gross profits in the first quarter.
“Markets remain challenging but forward/current indicators have improved with a rise in the permanent deal pipeline and a normal seasonal recovery in contract runners,” said Grobler.
“We continue to believe the market underestimates the medium term growth opportunities of this cash generative business.”
Grobler added that the strong profit growth reflects the 29 percent increase in average sales headcount, which the analyst said leaves the business “well placed to benefit from cyclical stabilization and structural growth in the future”.