Broker snap: Burberry underestimated

8th Feb 2011 12:47

RBS says "check in, not out" at luxury fashion label Burberry, as it believes the market underestimates its earnings potential."We view Burberry's turnaround story and relative share price outperformance of 59.9% over the past year, led by chief executive officer Angela Ahrendts, as exceptional," says the broker.RBS forecasts a three-year earnings per share compound annual growth (EPS CAGR) of 28% and a six-year EPS CAGR of 20%. Its 2012 and 2013 EPS estimates are 13% and 15% ahead of Bloomberg consensus, respectively.The target price is set at 1,500p, which the broker labels as conservative given the group's EPS growth estimates. A 'buy' rating is confirmed.