On Friday, RBC Capital updated its stance on Mobico Group PLC (MCG:LN) shares, increasing the price target to GBP0.70 from GBP0.65 while keeping a Sector Perform rating on the stock. The adjustment follows a reevaluation of the company's financial forecasts and a recalibration of valuation metrics.
In a recent statement, RBC Capital noted a reduction in its EBIT forecast for Mobico Group for the year 2024, now expecting GBP195.5 million, which sits within the company's provided guidance range of GBP185 million to GBP205 million. This revision represents a 2% decrease from previous estimates.
The firm also adjusted its expectations for Mobico Group's earnings per share (EPS), projecting a decrease of approximately 6% over the period from 2024 to 2026. This downward revision is attributed to anticipated higher interest expenses revealed in the company's first-half results.
Despite these revisions, RBC Capital has found reasons to raise the price target for Mobico Group. The increase to GBP0.70 is partly due to a reduction in provisions in the sum-of-the-parts (SOTP) valuation and a decrease in government bond yields, which affects the weighted average cost of capital (WACC) calculation used in the firm's valuation model.
The analyst from RBC Capital concluded by acknowledging that while the price target has been raised, they foresee greater potential for returns in other stocks within the sector. This suggests that the firm views Mobico Group as fairly valued at the moment, with other opportunities in the market presenting more attractive prospects for investors.
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