Shares in Stagecoach Group PLC (LON:SGC) are offering a potential short-term buying opportunity for investors on the back of founding shareholders announcing they are selling down their stake, analysts at Deutsche Bank reckon.
Last month it was announced that founders Sir Brian Souter and his sister Dame Ann Gloag are reducing their shareholding in the bus company from 27.1% to 25% and ringing the bell for a 10-year plan to cut their combined stake to around 5%.
Shares in the FTSE 250-listed company have underperformed the market in the last two weeks, falling around 13% compared to a 2% gain for the FTSE All-Share, Deutsche Bank noted.
“We continue to see the move as consistent with their gradual reduction in involvement…and as having only limited significance in terms of the outlook for the business,” the bank’s analysts told clients in a ‘buy idea’ note on Tuesday.
“At the same time, we think the pullback has created an interesting entry point in terms of valuation.”
With the shares at around 87p, the intraday price on Monday, Stagecoach is trading on a P/E ratio of 6.1 times the bank’s 2023 earnings per share forecasts.
With an enterprise value (EV) of 3.5 times underlying earnings (EBITDA), this puts the shares at around a 40% discount to the 10-year historical average of a 5.9x EV/EBITDA ratio.