Analysts at Canaccord Genuity lowered their target price on software and services outfit Kainos from 1,880.0p to 1,400.0p on Tuesday following a trading update from the group.
Canaccord Genuity said following a “strong” first half, today’s trading update from Kainos had highlighted that revenues and adjusted pre-tax profits were in line with consensus forecasts of £297.0m and roughly £59.0m, respectively.
The Canadian bank noted that this implies organic growth of at least 25% in the year and around 20% in the second half following the strong 32% showing in the first.
However, while Canaccord said the long-term outlook for Kainos remained “attractive”, with low-teens consensus sales growth for 2023 looking “conservative”, the analysts also pointed out that high IT salary inflation will likely continue to mute margin and earnings per share growth over the next 12-18 months.
“With the shares trading in line with their historic average and a well-deserved ~20% premium to listed peers, we see limited valuation upside and maintain ‘hold’, with our new 1,400.0p target price based on three P/E approaches,” said Canaccord.
