Berenberg reinitiates coverage of Kainos at 'buy', shares jump

30th Jan 2024 08:14

(Sharecast News) - Software company Kainos jumped on Tuesday as Berenberg re-initiated coverage of the shares with a 'buy' rating and 1,315p price target, citing an attractive entry point.

The bank said Kainos is a high-quality business that has demonstrated unusually strong revenue growth and consistently high cash returns on capital over an extended period.

"The company has developed a reputation for strong execution, driving high levels of customer satisfaction and best-in-class revenue retention," it said.

"The business is currently undergoing a cyclical slowdown in growth, and trades below its pre-Covid-19 average P/E multiple.

"In the context of a long runway for mid-teens revenue growth, margin accretion potential and, in our view, the likelihood that growth rates are close to troughing, a 4.6% free cash flow yield looks an attractive entry point."

At 1320 GMT, the shares were up 4% at 1,135p.