Cautious Hold Rating for SIG plc Amid Declining Profits and Leverage Concerns

SIG plc (SHI – Research Report), the Industrials sector company, was revisited by a Wall Street analyst today. Analyst Charlie Campbell from Stifel Nicolaus maintained a Hold rating on the stock and has a p14.00 price target.

Charlie Campbell has given his Hold rating due to a combination of factors influencing SIG plc’s current financial situation. The company’s recent financial results showed a significant decline in operating profit, which halved to £25 million due to a 5% drop in revenue. Despite this, there was a sequential improvement in like-for-like sales, which stabilized in the second half of the year.
Leverage concerns have also played a role in the Hold rating, as SIG’s shares have decreased by approximately 50% since October, largely due to worries about its leverage levels. Although the company’s leverage ratio is high at 4.7x, it remains below the covenant threshold of 6.5x, which is only tested under certain conditions. While there is potential for recovery, with shares trading at a low EV/Sales multiple, the limited cash flow and ongoing leverage issues suggest a cautious approach, justifying the Hold rating.