Caesars Entertainment misses Q2 earnings expectations, shares edge lower
Monday saw Stifel analysts downgrade Ricardo PLC (RCDO:LN) (OTC: RCDOF) stock from Buy to Hold, significantly reducing the price target to GBP2.80 from the previous GBP6.00. The revision followed a reassessment of the company’s financial estimates, which Stifel described as unexpectedly substantial. This reassessment comes shortly after Ricardo completed the sale of its Defense segment.
Stifel’s analysis acknowledged the strength of Ricardo’s Energy and Environment (EE) advisory business, which could command a high operating profit multiple if considered separately. However, they expressed skepticism about the likelihood of finding a buyer for the entire group, given its diverse range of operations. The analysts pointed out that following the estimate downgrades, Ricardo’s stock is trading at a fiscal year 2026 estimated pre-lease enterprise value to EBITDA (EV/EBITDA) ratio of approximately 7 times, which aligns with the ten-year average.
Ricardo’s portfolio, now more focused on the higher-margin EE advisory business, is still seen as vulnerable due to its elevated net debt. Stifel highlighted this concern in a recent sector note on the UK-listed professional services sector, suggesting that the debt level could hinder the company’s valuation improvement. Consequently, the firm’s sum-of-the-parts (SOTP) valuation has been adjusted to 280 pence, reflecting lower profit forecasts and more conservative valuation multiples.
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