Premier Foods shares bounce after ShoreCap reiterates 'buy'

27th Oct 2014 14:59

In spite of a profit warning from Premier Foods last week, the share price of the Hovis, Mr Kipling and Oxo maker has quickly clawed its way back, helped in part by upbeat comments from Shore Capital.Premier Foods' stock slumped on Thursday after the firm said in a third-quarter trading update that full-year profits would be "towards the lower end of market expectations". The company said that business was being affected by the travails facing larger supermarkets as discounters continue to take market share.ShoreCap analysts Darren Shirley and Clive Black admitted that they have cut their estimates for the company following the update, but said that "value [is] still evident" as they continued to recommend investors 'buy' the stock."Post the disappointing Q3 2014 trading update, we have thought long and hard about taking a more neutral position with our Premier Foods recommendation," they said."However, despite concerns that trading is likely to remain subdued as the UK's Big Four retailers are just beginning to fight back against the discount momentum, we still foresee a path whereby investors can extract considerable value from Premier's lowly rated stock, be it through debt/equity transfer, a modest re-rating or even income."The stock was up 4.7% at 33.5p by 14:59 on Monday, and while it has now fallen 73% over the year-to-date, it now stands close to the 34.25p closing price seen before the trading update on 22 October.Shirley and Black highlighted that Premier Foods' price-to-earnings ratio is just 4.4 on 2014 estimates.