Analysts at Berenberg initiated coverage on ingredients manufacturer Treatt at ‘buy’ on Thursday, stating the stock was “a natural beauty”.
Berenberg said a recent profit warning from Treatt, best known for the natural extracts it produces and sells to the global beverage sector, had dented investor confidence.
However, it believes the company to be “well positioned” for structural trends and said it has “the necessary ingredients” to be a multi-year compounder.
The German bank stated Treatt’s key attractions were its enduring sales growth, improving returns on capital, and favourable market position.
“Conversations with many of the company’s competitors, customers, and past employees corroborate our view,” said Berenberg, which started the stock off with a 680.0p price target.
“Our price target is calculated using a DCF valuation (50% weighting) and a target P/E multiple (50%). Treatt trades on a 24-month forward P/E of 23x.”
Reporting by Iain Gilbert at Sharecast.com
