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Investing.com -- Softcat Plc (LON:SCTS) shares rose over 4% on Thursday after the IT reseller reported stronger-than-expected fiscal 2025 results, though analysts warned the gains were again driven by large, unpredictable deals that cloud the outlook for 2026.
The company said adjusted EBIT for fiscal 2025 is expected to come in at about £177 million, slightly above consensus forecasts of £174 million.
Jefferies analysts noted that the improvement was largely the result of lumpy large deals rather than recurring business.
Looking ahead, management maintained its framework of low double-digit gross profit growth and high single-digit EBIT growth.
However, Jefferies said comparisons for fiscal 2026 will be complicated because roughly £7 million of the 2025 EBIT came from large contracts, setting a cleaner base at about £170 million.
On this basis, EBIT is projected to reach £185 million in 2026, short of the consensus estimate of £188 million, and £200 million in 2027, compared with consensus of £207.5 million.
The brokerage said the mismatch between guidance and consensus estimates raises questions over Softcat’s valuation.
Treating the company as a high single-digit grower aligns with its guidance but does not justify the premium multiple, while treating it as a double-digit grower leaves consensus ahead of expectations, creating the risk of future disappointment.
Jefferies also highlighted that Softcat’s premium relative to peer Computacenter has become more difficult to justify as earnings volatility grows.
Jefferies kept its "underperform” rating on the stock with a price target of 1,385p, implying a 12% downside from Wednesday’s close of 1,565p.
Over the past year, the shares have traded between 1,960p and 1,427p. Softcat’s market capitalization is £3.1 billion, or $4.2 billion.