On Monday, Deutsche Bank (ETR:DBKGn) adjusted its outlook on Renishaw Plc (LSE:LON:RSW) (OTC:RNSHY) shares, a global high-precision metrology and healthcare technology firm. The bank's analyst has lowered the price target for Renishaw to £40.00 from the previous £45.00, while maintaining a Hold rating on the stock.
The revision follows Renishaw's financial results for the fiscal year ending in June 2024, which reported a pre-tax profit (PBT) of £122.6 million, falling short of Deutsche Bank's expectation of £127.0 million. The analyst noted that the shortfall was partly due to one-time charges, including research and development impairments amounting to £3.3 million.
As a consequence of the reported earnings and commentary from the company's management regarding ongoing inflationary pressures, Deutsche Bank has revised its earnings per share (EPS) estimates downward for the fiscal years 2025 and 2026 by approximately 11% and 10%, respectively. This reassessment is largely attributed to reduced projections for operational gearing on additional sales.
The lowered price target of 4,000 pence represents an 11% decrease from the previous target, influenced by the company's performance and the analyst's anticipation of continued inflationary challenges. The bank cites the tough macroeconomic environment and Renishaw's valuation metrics, including a forward enterprise value to sales ratio of 3.14 times and a price-to-earnings ratio of 23.0 times (20.9 times excluding net cash) based on the revised estimates, as reasons for the maintained Hold rating.
Deutsche Bank remains attentive to Renishaw's prospects, acknowledging the company's tendency to be an early indicator within the market segments it covers. The bank's stance reflects a cautious optimism, given Renishaw's historical performance in similar economic cycles.
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