Liberum has upped both its forecasts and price target for SThree after the specialist recruiter posted a strong set of third-quarter numbers.
In a note published on Monday, the broker said third-quarter net fee income momentum had “accelerated well beyond expectations”.
It continued: “The contractor order book is strong – +41% – and SThree looks set to be the first in our coverage universe to breach pre-Covid peak pre-tax profit levels.”
Earlier on Monday, SThree had announced that full-year profits were likely to be “significantly above” market consensus following a 29% year-on-year hike in group net fees.
As a result, Liberum has upped its 2021 pre-tax profit estimates by 20%, to £60m, with the risk to forecasts remaining on the upside.
It also increased its 2022 full-year pre-tax profit forecasts, by 19.0%, though the bank noted: “The year-on-year growth in pre-tax profit is very cautiously set, reflecting the likelihood of further investment in the business to support future growth.”
The target price was increased to 650p from 580p. Liberum has an unchanged ‘buy’ recommendation on SThree, which specialises in placing professionals working in the fields of science, technology, engineering and maths.
It concluded: “The momentum in the business is, we think, a function of its focus on the strong recovery and secular growth in stem markets, as well as share gains.
“Momentum is strong, estimates are cautiously set and we continue to see the risks to forecasts to be on the upside. The valuation versus larger peers remains attractive.”
As at 1400 BST, shares in SThree were ahead 4% at 572.8p.
