Analysts at Berenberg raised their target price on pet supplies retailer Pets at Home from 540.0p to 570.0p on Wednesday following the firm’s first-quarter update back in July.
Berenberg highlighted that Pets at Home’s first-quarter update revealed revenue had grown much faster than even the most bullish predictions had anticipated.
The German bank, which reiterated its ‘buy’ rating on the stock, also pointed out that Pets at Home upgraded profit guidance to the top end of prior guidance in its update last month.
However, Berenberg stated the market reaction since had been muted, saying it can only assume investors may have anticipated a bigger upgrade.
“We feel this is missing the wood for the trees at this early stage of the year, and outline how the company could deliver pre-tax profit of as much as £160.0m this year (although our base-case estimates are more conservative for the time being),” said Berenberg.
“Pets at Home currently trades at 23.4x March 2022 P/E, and we would note the high scope for further upgrades, the fact that its balance sheet is net cash, and that its vet business would earn a very high multiple in a SOTP. If PBT did reach £160.0m this year, that multiple would drop to around c19x 2022E P/E.”
