Deutsche Bank Downgrades Babcock International to Hold

From morning note:

« We like Babcock‘s unique market position and high barriers to entry but downgrade to Hold as we do not see enough upside at this time. The stock is not expensive, leaving room for some price recovery on e.g. contract news, but in our view investors will need to see repeated strong reporting for a material & sustainable re-rating. While cash generation has been good, certain drags mean the valuation on cash metrics looks less attractive than on earnings multiples. Organic growth should improve next year, however we remain cautious on UK outsourcing as a whole and are not prepared to assume a return to previously seen growth levels. »

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