Analysts at J.P. Morgan reiterated their ‘underweight’ stance on shares of Croda, telling clients that the strong growth seen in 2021 did not reflect a step-change in its long-term growth prospects.
Instead, they argued, it was chiefly driven by the temporary boost from Covid-19 vaccines, on top of a cyclical recovery.
Hence, although they did bump up their estimates for the specialty chemicals manufacturer’s earnings per share in 2022 and 2023 slightly, they remained 5.3% and 14.2% below the Bloomberg consensus for those two years, respectively.
That also meant that the shares’ valuation remained expensive despite the 28% pullback seen in their price year-to-date.
Factoring-in the announced sale of the bulk of its stake in Performance Technologies & Industrial Chemicals business, the shares were changing hands on an estimated 2022-2023 price-to-earnings multiples of 33.4 and 37.0, respectively.
That compared to median levels of 29.9 and 23.3 over the past three and five years.
J.P. Morgan had a 6,600.0p target price for shares of Croda.
