Halma slumps as Berenberg says valuation ‘remains a hurdle’

Given the valuation issue - the shares trade at 47.0x March 2022 price-to-earnings and 31.4x EV/EBITDA - the bank said it prefers buy-rated Oxford Instruments, Diploma and Spectris, all of which trade on "more palatable multiples for similar exposure".

Still, Berenberg upped its price target on hold-rated Halma to 2,575p from 2,385p, saying it remains of the opinion that there are few better long-term investments.

"Halma is one of the highest-quality companies in the UK industrials sector, in our view, having delivered a 13% earnings per share compound annual growth rate since 2005 and 45 years of uninterrupted dividend growth. It has demonstrated good resilience, but not immunity, to the Covid-19 downturn," Berenberg said.

"Looking ahead, we think expectations are well managed and, with M&A also potentially on the cards, the risk to earnings is skewed to the upside."

At 1050 BST, the shares were down 5.1% at 2,707p.