Berenberg lowers target price on 'expensive' First Derivatives

Analysts at Berenberg lowered their target price on consulting services firm First Derivatives from 2,750.0p to 2,200.0p on Thursday, stating the firm's underlying performance had become "worrying".

Berenberg said its main motivator to cut its target price on First Derivatives was the fact that the group missed its full-year 2020 sales and underlying earnings expectations.

The German bank highlighted that growth had slowed "materially" during the second half in its consulting and software services divisions but said more disappointing was the continued fall in underlying EBITDA in 2020.

"The weak underlying trends, coupled with any potential impact from the Covid-19 pandemic only affecting the business after year-end, mean FD's FY 2021 outlook is challenging," said Berenberg.

With the shares trading at 33 times its price-to-earnings ratio and a roughly 2% free cash flow yield for 2021, Berenberg said First Derivatives was also "expensive".

"We cut our FY 2021/22 EPS estimates by 25%/10% respectively and price target to 2,200p (from 2,750p)," concluded the analysts, who also reiterated their 'hold' rating on First Derivatives.