Barclays raises target price on Johnson Service Group

Barclays said Johnson Service's value was mostly below the surface and while it acknowledged that it was unclear as to whether or not this would change on a twelve-month view, the analysts think the group was "far from a value trap".

The bank highlighted that stable pricing supported a margin recovery and stated that management could also add further value through the downturn.

"Therefore, we believe investors can confidently own it awaiting value to resurface with a HORECA (Hotels, Restaurants and Catering) upturn," said Barclays.

The analysts stated that given the group's pre-Covid track record of delivering more than 10% earnings per share growth via roughly 6% organic revenue, 2% organic margin expansion and bolt-ons, they think that with shares trading at around 12 times 2019 full-year net income, with only £200,000 of net debt, the stock looks cheap.

"We estimate current valuation only assumes HORECA recovers to a 7% EBIT margin <50% of FY19. We increase our PT to 175p on higher outer year estimates," the analysts concluded.