Broker tips: Carpetright, Pearson, Ashtead

Analysts at Panmure Gordon have today issued a biting note on Carpetright, with analyst Philip Dorgan indicating that: 'We are slightly surprised to see that UK second quarter like-for-like sales growth slowed from quarter one, given kitten soft comparables. However, gross margin guidance is retained and, despite a marked deterioration in the Netherlands, we don't expect that consensus forecasts will change. We remain sellers, because it will be a while before profits catch up with the valuation (66.2x prospective earnings).'The broker has placed a target price of 400p on the shares of the flooring retailer. Nomura comments this morning on Pearson's acquisition of Embanet for $650m dollars (£406m), or five times sales, calling attention to the similarities between Embanet and the Deltak business acquired recently by John Wiley for $220m (4x sales). Furthermore, its analysts highlight how -in their opinion: "the business provides more scale to Pearson's existing college solutions business (e.g., Arizona State and Calstate), and allows the company to capture more of the college's value chain without the significant working capital in books."Nomura adds that: "There will be some accretion in fiscal year 2013 but limited by integration charges. We estimate a 0.5% boost to organic growth. To reach targets, we estimate the revenue growth will have to be over 50% in fiscal year 2013 and circa 25% in fiscal year 2014, which poses some execution challenges. Post-acquisition valuation remains high and free-cash flow (FCF) around 7-8%."Following on from the above, Nomura has raised its price target to 1,250p from 1,200p, while maintaining its reduce rating. Analyst Kevin Lapwood at Seymour Pierce believes that US construction confidence reaching its highest level since 2006, coupled with the announcement by one of Ashtead's main US competitors, United Rentals (URI), of top of the range results for its third quarter results, bodes well for Ashtead's US business. Lapwood writes that: "URI's results showed the robustness of the equipment hire industry with the shift from ownership to rental showing no signs of abating. Ashtead's shares are trading on a prospective price earnings [PE] ratio of 13.1 times, which we believe is undemanding for a company expecting to deliver double digit earnings growth over the next three years. We reiterate our BUY recommendation and raise our target price to 400p (previously 350p), equivalent to a prospective PE of 14.8 times."AB Pearson