Analysts at Berenberg lowered their target price on engineering services firm Renew Holdings Plc from 1,350.0p to 1,200.0p on Tuesday following the company's recent trading update.
Berenberg said Renew's "usual meet-and-beat earnings momentum story" gave way to management cautioning that it expected trading for the year to 30 September to be below previous market expectations.
In the context of a 9% adjusted underlying earnings downgrade to its FY25 forecasts, the shares fell by roughly 22% on the day, a move that Berenberg considers to be "overdone", especially when considering that the shares had already drifted approximately 13% since 26 November.
"While short-term headwinds in the rail sector are a frustration, they distract from a provably strong management team and business model - operating margins remain resilient, returns are healthy, and the group's decentralised compounder model has a significant runway to continue, supported by a less-than-0.1x levered balance sheet," said the German bank, which reiterated its 'buy' rating on the stock.
"At just 11.5x FY25 P/E (10.5x FY26), on what we think are now comfortably positioned, if not conservative outer year forecasts, we think this offers an attractive entry point into a quality long-term story."
Reporting by Iain Gilbert at Sharecast.com