Canaccord Genuity raises target price on XPS Pensions

Analysts at Canaccord Genuity upped their target price on consulting and administration business XPS Pensions Group from 251.0p to 262.0p on Tuesday, citing "positive momentum" that had carried over into the first half of the new trading year.

Canaccord Genuity said that following a "strong" first-half pre-close update from XPS, it had upgraded its FY24-26 adjusted diluted earnings per share forecasts for the group by 4-5%.

"During the period, strong revenue growth was driven primarily by high activity levels with additional benefit from inflation-linked contracts," said Canaccord.

The Canadian broker also noted that XPS had continued to invest during the period "whilst continuing to deliver operational gearing", with the board now "confident of achieving full-year results ahead of its previous expectations".

"We update our forecasts, resulting in circa 5% revenue upgrades across our forecast horizon and adjusted diluted EPS forecasts by 4-5%. We expect the adjusted EBITDA margin to improve to 26.3% in FY24 (FY23:25.5%)," said Canaccord, which reiterated its 'buy' rating on the stock. "We maintain our previous valuation and target price methodology, ie applying a target PE multiple of 17.8x to the CY24E EPS forecast."

Reporting by Iain Gilbert at Sharecast.com