JP Morgan upgrades Diploma on proposed acquisition of Windy City Wire

Analysts at JP Morgan hailed Diploma's plans to acquire Windy City Wire, in turn bumping up their target price and recommendation for the shares.

The proposed £357m transaction, which would be party funded by means of an equity placing worth 10% of Diploma's equity marked a "step-change" in the size of the company's acquisitions, they said, as did the price paid.

Diploma was to pay a price worth 11.5 times' CWC's earnings before interest tax, against a historic average EBIT multiple for acquisitions of five to eight times.

Nevertheless, CWC appeared to have many "attractive" characteristics and Diploma's financial year 2021 EBIT was now expected to be 26% higher and its earnings per share 11% stronger, they added.

That put the shares on an "attractive" August-2022 price-to-earnings multiple of 20.6.

Hence, on their updated estimates their price target for the shares was revised higher from 1,850.0p to 1,960.0p and their recommendation to 'overweight'