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Investing.com - BofA Securities initiated coverage on XPS Pensions Group (LON:XPS) with a Buy rating and a price target of GBP4.26, citing the company’s high-quality business fundamentals and potential for growth.
The investment bank highlighted XPS Pensions’ strong financial metrics, including a fiscal year 2025 return on invested capital of 19.9%, projected to increase to 27.0% by fiscal year 2028, along with approximately 90% cash conversion.
BofA Securities views XPS as a "structural beneficiary of regulatory reform" with bulk annuities providing sustained demand for higher-margin advisory services, according to its research note.
The bank estimates that XPS could add 22% to its fiscal year 2028 EBITDA through mergers and acquisitions, with additional upside potential if the company pursues more aggressive leverage strategies.
BofA Securities noted that XPS currently trades at a 12-month forward price-to-earnings ratio of 14.0x, which is 26% below this year’s peak, and projects a potential total shareholder return of 40% based on its discounted cash flow analysis.
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