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(Sharecast News) - RBC Capital Markets nudged its price target on Alliance Pharma down to 60p from 65p on Wednesday as it said it was rebasing its forecasts as trading normalises.
The bank, which rates Alliance at 'outperform', said it applies 11x price-to-earnings and 6x EV/EBITDA multiples, representing the bottom of the 2025E ranges of global consumer health and UK smid healthcare peers, to its 2026 earnings forecast.
This implies a 12% cost of equity in its discounted cash flow calculation.
RBC cut its 2024 pre-tax profit estimate by around 20%, mostly based on higher operating investments, although it has trimmed revenue forecasts on the basis of the 'above market' guidance provided by the company.
The bank said many of the issues faced by Alliance Pharma in the last 18 months are behind it, and the company now aims to increase marketing investment in its key brands.
"Once the CMA appeal overhang is resolved (we assume imminently), the shares can start better reflecting fundamentals of a growth Consumer Health business, and we see 50% upside to the stock in the first leg of its recovery," it said.
