Ashtead boosted as BofA Merrill highlights attractive growth

15th Feb 2017 09:43

(ShareCast News) - Ashtead got a boost on Wednesday as Bank of America Merrill Lynch upped its price target on the stock to 2,000p from 1,620p and reiterated its 'buy' rating.The bank said Ashtead remains an attractive long-term investment opportunity, offering around 20% earnings per share compound annual growth rate for an attractive price-to-earnings rating of 12.6x to April 2018."The long-term growth story of structural and macro growth remains well entrenched with the added benefits of self-propelled growth fragmented markets and relatively placid competition," Merrill said.In addition, it argued that tax reform in the US could add 14% to 20% to EPS.Merrill pointed out that Ashtead generates 92% of its earnings before interest and tax in the US and has a relatively low interest cost line."Therefore, the net benefit of a reduction in the corporate tax rate from 35% to 20% is material."Including the offset of disallowed interest costs against tax, it estimated that net benefit to full-year EPS could be around 14%. If the rate of tax was slashed to 15%, the benefit to EPS could be as high as 20% and this is not reflected in the shares, BofA said.At 0947 GMT, the shares were up 2.5% to 1,707p.