Saga share price: Peel Hunt sees stock as undervalued

Analysts retain ‘buy’ rating on shares after results

Saga share price: Peel Hunt sees stock as undervalued

Peel Hunt sees Saga’s (LON:SAGA) shares as undervalued and the group’s business as ‘attractive,’ Citywire reports. The comments came after the lifestyle group for the over-50s updated investors on its full-year results yesterday, revealing a rise in profits for the 12-month period ended January 31.

Saga’s share price, which rallied in the previous session, has extended gains in today’s trading, having added 2.18 percent to 126.40p as of 10:24 BST. The stock is outperforming the mid-cap FTSE 250 index which currently stands 0.32 percent higher at 19,836.90 points.

Peel Hunt upbeat on Saga

Peel Hunt reiterated its ‘buy’ rating on Saga yesterday, with a price target of 195p on the shares. The move followed the group’s full-year results which revealed a rise in underlying profit before tax and a drop in profit from continuing operations.

“Saga’s transition towards an affinity broker model came under pressure last year, with the broker losing competitive momentum due to Saga-specific issues,” the broker’s analyst Andreas van Embden explained, as quoted by Citywire. “At a price/earnings of c.9x 2018/19 earnings per share, the shares are undervalued relative to a typical 16-18x broker multiple.”

Van Embden further noted that while the broker acknowledged weak growth ahead, it also fundamentally believed that “Saga is an attractive business with strong cash generation potential once the transition is achieved”.

Other analysts on group

Numis Securities, which sees Saga as a ‘buy,’ lowered its price target on the shares from 235p to 180p yesterday while earlier this month, UBS initiated coverage of the lifestyle group with a ‘neutral’ stance, without specifying a valuation on the shares. According to MarketBeat, the cruises-to-insurance provider for the over-50s currently has a consensus ‘hold’ rating and an average price target of 198.8p.

As of 10:33 BST, Friday, 13 April, Saga PLC share price is 126.50p.

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