Inspired PLC underrated and under-appreciated reckons broker

’s () pace of evolution and growth is being underestimated by the market, according to Peel Hunt, which rates the group as a buy with a 25p target.

The energy consultant is yet to be credited with the sale of its SME operation, adds the broker, especially the earnings and cash benefit while that disposal has cleared the way for the remaining business to deliver sustained growth.

Helped by well-timed acquisitions, the “digitally-led, scalable platform is fully capable of delivering double-digit organic EBITDA growth and attractive cash flows,” said Peel Hunt.

Opportunities for further M&A in fragmented markets add to the investment case, argues the broker.

The business is now structured into three divisions: Energy Solutions; Software and ESG, all of which are characterised by long-term structural growth drivers says the broker.

Energy Solutions, the largest area of operation with 95{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} of profits, helps corporates better manage energy costs and reduce their carbon footprint.

Software provides digital solutions to support internal and external customers while ESG specialises in end-to-end solutions for businesses and is set to be a material contributor to profits as this market booms.

“Although the shares have recovered to pre-pandemic levels, they remain below the peak levels seen in 2017 (24p),” said Peel Hunt, the company’s house broker.

“We believe that the strategic and operational progress since that period justifies a near-term share price target of 25p.

Our 25p target price equates to 16 times  20203 forecast earnings or a 6{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} FCF (free cash flow) yield.

“We believe this is fully supported by the visibility inherent in the business.

“Moreover, this target price is supported by our DCF model above. Clearly, any further M&A would lead us to review the target price.”

Shares were 19.6p today.