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Berenberg puts JD Sports in 'a league of its own', highlights cash generation

By Iain Gilbert

Date: Wednesday 11 Sep 2019

Berenberg puts JD Sports in 'a league of its own', highlights cash generation

(Sharecast News) - Analysts at Berenberg upped their target price on 'buy' rated JD Sports from 700p to 800p on Wednesday, stating the group was in "a league of its own" while highlighting the retailer's free cash flow and telling clients worrying that they had 'missed the boat' that the stock's valuation was still impressive.
And even as JD Sports continued to go from "strength to strength", as evidenced by another "impressive" performance against a challenging retail backdrop, Berenberg said that its initial "blue-sky" scenario for the group's US subsidiary Finish Line was looking more achievable.

The German bank pointed out that guidance upgrades at this stage of the year highlighted management's confidence, with exceptional momentum and near-term profit tailwinds suggesting that even more upgrades were still likely to come.

Bernberg's analysts raised their pre-tax profit forecasts for JD around 4% to capture the momentum, although its earning per share forecasts rose just 2% as a result of a higher tax rate.

Free cash flow forecasts on the other hand were hiked roughly 9% to reflect lowered guidance for capital expenditures.

"While investors may be forgiven for fearing they have missed the boat, valuation still remains attractive," said Berenberg.

Berenberg reached its new target price for JD after valuing the group on a 4.5% FCF yield, given its sector-leading cash generation and "superior earnings growth".

"This still leaves further upside from our blue-sky Finish Line/Footasylum scenario," said Berenberg, reiterating JD's stock as its 'top pick' in the sector.


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