Berenberg lowers target price on RWS following FY trading update

Berenberg said RWS' update confirmed the group had returned to growth in H224, delivering 2% organic constant currency revenue growth in the period. Adjusted pre-tax profits were also expected to be within the range of current consensus expectations for FY24, before FX headwinds.

The German bank, which reiterated its 'buy' rating on the stock, sees this as proof that recent pressures on trading have been either cyclical or market-related and were now easing, with management expecting FY25 to be a further year of organic constant currency growth.

However, unfavourable FX movements were expected to have a significant impact on profits in FY25, leading to a roughly 23% downgrades to Berenberg's earnings forecasts for RWS.

"Despite this, we note that on our new forecasts RWS trades on just 8.2x FY25 P/E and 4.2x EV/EBITDA, which we think is attractive for a business that now appears to have seen a reversal of fortunes notwithstanding FX, and where today's performance should help assuage investor concerns about AI's impact on the industry," said Berenberg.

Reporting by Iain Gilbert at Sharecast.com