Numis sees possible share price catalyst on the horizon for Sophos Group

Numis sounded an optimistic note on Sophos Group ahead of the company's Capital Markets Day, pointing to the firm's strong products, a substantial market opportunity and the attractive cash flow yield on offer to back up its arguments.

Against that backdrop, it believed the IT security specialist's upcoming CMD on 29 June was a potential positive catalyst on the horizon.

The broker also called attention to recent mergers and acquisitions activity in the space (Symantec/Bluecoat, Fireeye), which in its opinion meant that trade buyers saw value in the company.

It also provided strong validation of Sophos’s integrated network/endpoint strategy, analysts David Toms and Will Wallis said in a research note sent to clients.

Toms and Wallis believed there was ongoing tension between the shares' price-to-earnings multiple of 61 and their "relatively attractive" 7.7% fre-cash-flow yield, alongside top-line growth in the low-teens.

"Sophos has demonstrated much greater longevity and adaptability than many peers, and looks positioned for at least modest financial outperformance," they said.

In their opinion, the complexity of the company's financials and potentially high level of share-based payments had been weighing on the stock.

The analysts stood by their 'hold' recommendation and 213p target price on the shares.