Broker Jefferies has amped up its price target for Electrocomponents PLC (LON:ECM) after yesterday's interim results from the electronics products supplier.
The new price target is 600p, up from 530p previously, but seeing as Electrocomponents currently trades at around 660p, the bigger surprise is that the US broker has stuck with its 'hold' rating.
READ: Electrocomponents shares up as it delivers stronger-than-expected revenue growth and upgrades profit forecast
“In-line interims contained many examples of strategic progress: sustained investment in digital, better gross margin control, and improved customer experience,” Jefferies noted.
Free cash flow was hit by inventory investment, but should improve in the second half of the financial year.
The group is making strategic progress, with the digital side of the business growing 14% year-on-year in the first half, the group demonstrating better control of pricing to the benefit of the gross margin (which was a bit better than expected) and a further improvement in the Net Promoter Score, which suggests that the customer experience is improving.
Even at the unambitious price target of 600p the stock trades on a multiple of 18 times projected earnings, which is above the 10-year average of 14.5, which Jefferies said makes the shares fully valued.