BofAML downgrades Admiral on valuation grounds

7th Sep 2015 14:44

(ShareCast News) - Bank of America Merrill Lynch downgraded Admiral to 'neutral' from 'buy' on valuation grounds, keeping the price target at 1,650p.It noted the stock has outperformed the sector by 20% year-to-date in constant currency terms and around 15% since the interim results."With around 12% total returns forecast, this is now below average for the sector," the bank said.Nevertheless, Merrill said it continues to believe the company is well positioned and benefits from an attractive dividend yield."Admiral has bond like qualities in our view, with an attractive dividend yield supported by well stocked reserves. And it is the purest play (in our coverage) on what appears to be a gradually improving UK motor pricing cycle," said the bank.It added, however, the valuation is increasingly reflecting this, with the stock trading on 15.4x headline estimated 2016 earnings per share.At 1450 BST, Admiral shares were up 0.2% at 1,552p.