RBC Capital reiterates positive outlook on W7 owner Warpaint

RBC Capital Markets reiterated its positive outlook on cosmetics firm Warpaint on Friday, saying it continues to believe the company is well positioned in the market, successfully executing on its growth strategy.

Warpaint owns brands such as W7 and Technip.

"With strong retail partners on board in the UK/US/EU and continued expansion plans, we believe W7L is well positioned to continue growing ahead of the underlying market (circa 6% compound annual growth rate)," RBC said.

The bank said it forecasts revenue growing at about 13% CAGR through 2026, combined with 30 basis points/year adjusted EBITDA margin progression.

It said that following the recent release of financial results from peers e.l.f. Beauty and Revolution Beauty, it has noted some key strategic takeaways amongst the group.

"Overall results have been good for the group with all reporting positive growth outlook statements and continued expansion with retailers," it said. "This is underpinned by consumer demand for an accessible, on-trend, quality cosmetic range at an affordable price. Overall, this gives us further confidence on our outperform thesis."

The bank maintained its 685p price target on the stock.

RBC said that given the shares are currently trading at CY2025E EV/adjusted EBITDA of 14.5x, versus e.l.f at 21.4x, it thinks there is an opportunity here for investors.

"We expect W7L to trade more in-line with its peer multiples as it continues to demonstrate its ability to grow and maintain margins."