Morgan Stanley upgrades B&M, now willing to buy into company´s valuation

Yes, the shares were now trading below the price at which they debuted on the stockmarket, but in their opinion that was because the valuation was "too demanding" when it listed - at 25 times forward earnings.

Since then, the company had grown into its valuation, with earnings before interest and tax expanding by 49% since then while profits more than doubled.

Yet the shares had done little more than track the wider UK retail sector, they pointed out, and now its valuation multiples "look very reasonable to us for a company still growing sales and earnings at circa 15% per annum."

Geoff Ruddell, Amy Curry, Anisha Singhal reeled off a list of supportive facts to back up their case, including a differentiated proposition,a strong operating model, a great track record, and significant further roll-out potential.

Indeed, the results of a consumer survey they conducted during the previous week revealed that more than 40% of those living in the South of England had not yet heard of the chain.

The analysts added that they were becoming increasingly optimistic that the company might be able to replicate its sucess in the UK in Germany and - "if that works" - in other European markets.

In their 'blue sky' scenario, the firm becomes "the Dollar General of Europe", in which case they believed B&M could be worth as much as 1000p per share.

That had not been factored into their 'bull case' "let alone" their base case.

Nonetheless, Ruddell, Curry and Singhal boosted their target price on the stock from 270p to 315p while upgrading their recommendation from 'equalweight' to 'overweight'.