Broker snap: Some scope for appreciation at Renishaw

10th Sep 2010 13:08

A meeting with the company's management team has prompted FinnCap to substantially increase its earnings forecast for Renishaw after the company's upbeat trading update on Thursday.Management indicated that it was comfortable with a £240m annual revenue run rate for the year and a gross margin of close to 50%, which FinnCap calculates should deliver pre-tax profits of £55.9m, compared to FinnCap's previous forecast of £41.5m. The earnings per share estimate has been bumped up by 34% to 61.1p from 45.3p.The broker had expected a positive share price reaction to the trading statement but was a little taken aback by the strength of the price rise. It has cranked up its own target price to 1100p, which is based on a fair value of 18 times projected current year earnings.Thursday's strong price rise means that, even with the price target upgrade, the shares qualify as no more than a "hold", with "some further scope for appreciation."