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Investing.com - Berenberg has upgraded Softcat (LON:SCTS) Plc. (LON:SCT) from Hold to Buy and raised its price target to GBP19.00 from GBP16.00, citing the company’s strong operational performance and recent share price decline.
The upgrade follows a 15% sell-off in Softcat shares over the past two weeks, which has created a more attractive valuation entry point according to the research firm. Berenberg noted that its view on the company has always been positive, but the current valuation makes the stock more compelling.
Softcat currently trades at 22.6x FY26 price-to-earnings ratio and offers a 4.0% free cash flow yield, compared to when Berenberg initiated coverage on October 1 when the stock traded at 26.6x P/E with a 3.4% free cash flow yield.
The research firm highlighted Softcat’s consistent ability to beat market expectations as a key factor in the upgrade decision. Berenberg now expects a 10% earnings per share compound annual growth rate from FY24 to FY26.
The new price target of GBP19.00 represents a significant increase from the previous target of GBP16.00, reflecting Berenberg’s enhanced outlook for the IT infrastructure provider.
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