Which companies are trading at the largest discount to their consensus target price?

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When it comes to dishing out the “buy” ratings, stockbrokers are not exactly reluctant.


Put another way, brokers are loath to apply a “sell” rating to shares of a company that might potentially be a future client.


So, take “buy” ratings with a pinch of salt, especially when it is the house broker making the recommendation.


That being said, there is no rule – even an unwritten rule – that says a broker has to go mad with its target price. Most analysts are inveterate number crunchers with spreadsheet-based models they use to apply a target price to a share (usually over a 12-month timeframe) and this can be an indication as to just how enthusiastic they truly are about a share.


To be sure, the maxim “garbage in, garbage out” applies and if an analyst’s underlying assumptions are wrong then no matter how finely tuned the spreadsheet model is, the target price is likely to be as much use as last week’s losing lottery ticket.


Nevertheless, Proactive thought it would be interesting to check out which stocks are trading at levels that are most out of whack with the consensus target price.


We restricted our search to those companies that are followed by at least three brokers so as to weed out the tiddlers that are only covered by their house broker and one other broker hoping to be that company’s next house broker. Even so, caution is advised; a lot of companies these days are paying research houses to produce investment analysis and it is possible that some of these “research house for hire” companies’ target prices have been included in the data.


Below is the list of 20 stocks on the London Stock Exchange that are trading at the largest discount to the consensus target price.


Rank

Company name

Number of brokers covering the stock

Consensus target price

Last night’s closing price

Upside to target price

1.

Chaarat Gold Holdings Ltd (AIM:CGH, FRA:9IS)

3

57p

20.4p

179%

2.

SolGold PLC (LSE:SOLG, TSX:SOLG, OTC:SLGGF, FRA:S8F)

5

62p

26.5p

134%

3.

Ceres Power Holdings PLC (LSE:CWR)

8

1,811p

932p

94%

4.

Puretech Health PLC

3

660p

343p

92%

5.

IOG PLC (AIM:IOG)

3

37p

19.75p

87%

6.

Seeing Machines Ltd (AIM:SEE, OTC:SEEMF, FRA:M2Z)

3

15p

8.25p

82%

7.

Georgia Capital PLC

3

1,146p

636p

80%

8.

M&C Saatchi PLC (AIM:SAA)

3

211p

130p

62%

9.

Indivior PLC (LSE:INDV)

3

244p

154.6p

58%

10.

Lookers PLC (LSE:LOOK)

3

98p

63.8p

54%

11.

SEPLAT Petroleum Development Co PLC

4

154p

101p

52%

12.

Wentworth Resources PLC (AIM:WEN)

3

35p

23p

52%

13.

Anexo Resources PLC

4

219p

144p

52%

14.

Rank Group (LSE:RNK) (The) PLC

3

242p

159.2p

52%

15.

Essentra PLC (LSE:ESNT)

3

410p

282p

45%

16.

TinyBuild Inc

4

310p

215p

44%

17.

IG Design Group PLC (LSE:IGR)

3

740p

514p

44%

18.

Secure Trust Bank PLC (LSE:STB)

4

1,740p

1,210p

44%

19.

Renewi PLC (LSE:RWI, FRA:1K5)

3

783p

546p

43%

20.

French Kier PLC

3

177p

123.8p

43%

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