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Investing.com -- ConvaTec Group (LON:CTEC) was downgraded to "sector perform" from "outperform" by analysts at RBC Capital Markets, who said further share price gains are unlikely in the near term after a strong run of outperformance, in a note dated Monday.
The brokerage raised its price target on the stock to 320p from 305p, reflecting upward revisions to its earnings forecasts.
The downgrade comes as ConvaTec’s shares have surged about 30% relative to the broader sector since the beginning of 2025.
Despite continued strong operational execution, RBC said the current valuation already reflects much of the recent positive developments, including momentum from the company’s InnovaMatrix portfolio and guidance upgrades.
Analysts revised their earnings forecasts following the company’s four-month trading update.
EPS estimates were raised by 1.2% for 2025 and 1.3% for 2026, reflecting improved margin expectations.
RBC now projects ConvaTec will deliver a 14% compound annual EPS growth rate from 2025 to 2027.
The updated 320p price target is based on applying a 22x multiple to the 2026 EPS forecast.
RBC said this valuation places the stock in the upper half of its peer group range but leaves little room for additional multiple expansion in the short term.
Risks cited include uncertainty around the performance of the InnovaMatrix unit, potential impacts from tariffs, and second-half margin execution.
“Valuation is now at the upper end of the historical range and above the peer group average,” RBC analysts said.
Longer-term, RBC maintains a more constructive view. If ConvaTec can maintain execution and achieve its target of mid-20s EBIT margins, RBC believes the stock could merit a higher P/E multiple.
Under that scenario, a 24x multiple applied to 2027 forecasts would imply a share price of 400p by the end of 2026.