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Deutsche Bank has adjusted its stance on SSP Group Plc (SSPG:LN) (OTC: SSPPF), reducing the price target to GBP2.85 from GBP3.05, while maintaining a Buy rating on the stock.
The analyst from the bank provided insights into the company's financial year 2024 (FY24) performance, noting a strong profit recovery during the summer months. However, the analyst pointed out that all regions, except for Continental Europe, are experiencing structural growth.
SSP Group, which operates food and beverage outlets in travel locations, has been observed to have management implementing overdue changes to address performance issues in Continental Europe.
These issues are reported to have a negative impact of up to 20% on the group's results. In addition to these changes, the company has also shifted its approach to free cash flow (FCF), demonstrating restraint on capital expenditures and mergers and acquisitions (M&A).
This new financial strategy has resulted in a roughly GBP30 million improvement in net debt outcomes for FY24. Despite these positive developments, SSP Group's share price has seen a decline of 30% year-to-date (YTD), contrasting with a 7% decline in the FTSE All-Share Index (FTAS). However, the share price has increased by 8% since the company reported its third-quarter trading results.
In terms of valuation, SSP Group is currently trading at a forward price-to-earnings (P/E) ratio of 12.4 times for FY25 and offers a dividend yield of 3.2%. Deutsche Bank's analysis concluded that SSP Group presents a combination of value, income potential, and self-improvement opportunities, which contributes to the firm's positive outlook on the stock.
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