Buy Coats Group shares on weakness, says RBC Capital Markets

With the shares down more than 7%, RBC Capital Markets highlighted three reasons to buy the shares on weakness: the fact that Coats is still "a very stable business", an expected recovery in medium-term growth and an attractive valuation.

"We still see Coats as attractive despite a reduced 2019 outlook,"” it said. "It remains a stable business - despite a tougher macro backdrop, sales are flat year-on-year in H2 to date and EBITA is still growing slightly year-on-year.

"We expect some of the drags on sales to alleviate such that growth will improve in 2020E and the valuation is attractive on 8x20E EV/EBIT / 12x20 price-to-earnings."

RBC cut its price target on the outperform-rated stock to 90p from 105p to reflect a more conservative discounted cash flow valuation as it reduced its forecasts to account for revised guidance. Its 2019 earnings per share estimate was reduced by 4% and its 2020 estimate came down 3%.