Broker snap: Book profits at Dignity

29th Jul 2009 12:42

It is time to take profits at funeral services provider Dignity, reckons broker KBC Peel Hunt, after the share's good run since early May.The broker said Wednesday morning's results were in line with expectations, with the second quarter showing a slowdown from the first. With the shares now trading on a price/earnings ratio of 16.4 and 10 times the ratio of enterprise value to earnings before interest, tax, depreciation and amortisation, based on projected full year earnings, now "looks a good opportunity to book some profit", the broker believes.KBC has downgraded its recommendation from "buy" to "hold" in the wake of the share price's advance from around 510p in the early part of May to its current level of around 620p. The broker has a target price of 700p for the stock. "The slowdown in EBIT growth in Q2 may look worrying, but we believe this to be due to the return of the death rate to normal after the high level in Q1. Dignity remains a safe way to play a tough consumer environment, but current valuations provide little short-term upside," said KBC analyst Charles Hall.Broker Panmure Gordon remains a buyer, however, and has a price target of 872p. "As the company continues to prove that it can perform well in a downturn, the stock should remain a core holding for now in our view," the broker said.