Based on the consensus earnings forecast for next year, the stock is trading on a multiple of 19, compared to a 10-year average multiple of 10.6.
“Earnings momentum has been positive at Computacenter for some time, with a 12% CAGR [compound annualised growth rate] delivered over the decade to 31 December 2017, and earnings growing each year bar one (2012); however, with the shares trading at multiples not seen since May 2000 and the bursting of the dot.com bubble we regard the value as challenging. Notwithstanding the good execution, we see the managed services market as mature and competitive – something not adequately reflected in the current price,” UBS said, as it edged up its price target to 1,255p from 1,230p.
Computacenter shares currently trade at around 1,300p.
The broker said that at the capital markets day held by Computacenter last month, the company highlighted a number of positives but also said that the UK services business was subject to price pressure in a competitive marketplace.
The group also said it needed to increase its offshore delivery capabilities.
“With no update due before interim results on 24 August we struggle to see the shares' recent momentum being sustained,” the broker concluded.