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On Tuesday, Stifel analysts upgraded Knights Group Holdings plc (KGH:LN) stock from Hold to Buy, setting a new price target of GBP1.70, up from the previous GBP1.35. The revision reflects a positive outlook on the company’s potential earnings, despite the challenges in organic growth within the sector.
Stifel analysts highlighted the recent trend of UK-listed professional services firms, such as XPS, Elixirr, FRP, and Keystone Law, raising their estimates. This sector movement, combined with Knights Group’s steady performance and strategic focus on acquiring larger businesses, prompted the upgrade. The analysts anticipate that there could be an upside risk to the firm’s adjusted profit before tax (PBT) for the fiscal year 2025, given the evenly weighted forecast between the first and second half of the year, contrasting with the historical pattern where approximately 57% of adjusted PBT was weighted towards the second half.
The valuation of Knights Group Holdings remains low, with a forward price-to-earnings (P/E) ratio of approximately 5.2 times for FY26E, even after the stock’s recent gains. According to Stifel, near-term forecast risks seem to be leaning towards the upside, and the current market backdrop is considered stable.
The analysts also expressed a favorable view of Knights Group’s recent strategic shift towards integrating fewer, but larger businesses. This approach is seen as a positive development for the company’s future growth and market position.
In conclusion, Stifel’s upgrade to a Buy rating and a higher price target of 170p from the previous 135p, is underpinned by a combination of industry trends, the company’s strategic acquisitions, and a relatively subdued valuation that suggests potential for stock appreciation.
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