Which stocks are trading at the biggest premium to their target price?

Last week we had a look at the stocks that are trading at the largest discount to broker target prices.

It seemed to prove popular so here is a list of the (ostensibly) most overvalued stocks listed in London, according to brokers’ price targets.

As before, we restricted our search to those companies that are followed by at least three brokers.

It’s worth bearing in mind that even research analysts can fall behind on their workload and the market tends to adjust the share price of a stock on bad news a lot more swiftly than the typical research analyst will adjust his or her target price.

The same thing usually applies for good news. For example, one of the stocks in the list, Sumo Group PLC (AIM:SUMO), recently accepted a 513p per share takeover bid from Tencent, an offer that was pitched 43% above the prevailing share price. The consensus target price (i.e. the median forecast of the 12 brokers that follow it) for Sumo is 434p, suggesting that the analysts have not updated their forecasts or do not see the point given the company is going to be taken over anyway.

So, without further ado, below is the list of 20 stocks on the London Stock Exchange that are trading at the largest premium to the consensus target price.

Rank

Company name

Number of brokers covering the stock

Consensus target price

Last night’s closing price

Downside to target price

1.

HgCapital Trust (LSE:HGT) PLC

3

242p

393p

38.4%

2.

Hurricane Energy PLC

3

1.9p

3.03p

37.3%

3.

Dignity (LSE:DTY) PLC

3

539p

782p

31.1%

4.

Domino’s Pizza Group PLC

9

330p

420p

21.4%

5.

Frasers Group PLC (LSE:FRAS)

6

472p

594p

20.5%

6.

Hammerson (LSE:HMSO) PLC

17

30p

37.62p

20.3%

7.

Spirax-Sarco Engineering (LSE:SPX) PLC

17

11,725p

14,620p

19.8%

8.

Ultra Electronics (LSE:ULE) PLC

8

2,554p

3,110p

17.9%

9.

Admiral Group (LSE:ADM) PLC

16

2,823p

3,326p

15.1%

10.

Rightmove PLC (LSE:RMV)

19

579p

668.2p

13.3%

11.

Sumo Group PLC (AIM:SUMO)

12

434p(1)

498p

12.9%

12.

Gear4Music PLC

3

839p

950p

11.7%

13.

Discoverie Group PLC

7

856p

968p

11.6%

14.

Renew Holdings (AIM:RNWH) PLC

6

677p

760p

10.9%

15.

Big Yellow Group (LSE:BYG) PLC

12

1,273p

1,418p

10.2%

16.

GCP Student Living PLC (LSE:DIGS)

4

191p

212p

9.9%

17.

Superdry PLC (LSE:SDRY)

8

357p

396p

9.8%

18.

Chrysalis Investment Ltd

3

230p

254p

9.4%

19.

VPC Specialty Lending Investments PLC

3

77p

85p

9.4%

20.

NB Private Equity Partners Ltd

3

1,361p

1,500p

9.3%

Note 1: Presumably, not updated since the company recommended a 513p per share takeover bid