Proactive Investors - Capita PLC (LON:CPI) shares have bucked the weaker market supported by an upgrade by Shore Capital which is targeting 50% upside.
Analyst Robin Speakman has put the stock on the broker's buy list, upgrading from hold, helping to send the stock 3.2% higher at 20.94p.
He thinks “with restructuring due to complete this year, that Capita is set to begin to deliver better results.”
“Much is now behind the group, challenges remain, but survival is not in doubt," Speakman explained, adding that "over the next year we expect to see free cash flow strengthen and profitability rise.”
Capita retains a forward order book of c.£5 billion with underlying operating margins in the c.7% range across public sector and experience divisions, but is also still carrying some non-performing contracts pulling margins down, he noted.
"We expect these contracts to wind down and/or be negotiated out of the book over the next two years, and combined with ongoing cost reduction/efficiencies at all levels, finally delivering visibility on a rising reported margin track - also a swing back to positive cash generation into FY25F," the analyst continued.
As a result he said he couldn’t “justify a 20p share price," and has set an initial 30p share price target.
The outsourcer has attracted the headlines this year after a cyber attack which will cost the firm around £25 million.
Shares in the firm remain down 17% in the year to date.