It has been a good year so far for ‘recovery story’ Mitie (MTO), with the shares up 19% at the time of writing and 27% higher than when we recommended the stock in April 2024 compared with a slight fall in the FTSE 250.
We said at the time the new management team led by Phil Bentley had put the business – which looks after buildings from banks to schools, hospitals and critical government sites – back on track, and increased regulation would act as a tailwind to growth.
WHAT HAS HAPPENED SINCE WE SAID BUY?
Back in November 2024, the company posted strong first-half results with revenue and operating profit for the six months to September up 14% driven by 8% organic sales growth from record new contract wins, increases in the scope of some projects and higher prices.
The board reiterated its confidence in hitting its full-year targets and in the lead-up to the results doubled the share buyback to £100 million.
Last month, the group upgraded its full-year revenue and profit guidance (16 April) and announced a new £125 million share buyback, sending the shares to a three-year high.
Chief executive Phil Bentley commented: ‘We are entering FY26 with good sales momentum, including the new security contract win with DWP (Department of Work & Pensions), a record pipeline of opportunities and a strategic focus on how AI and intelligent process automation can help to deliver margins above 5% by FY27.’
WHAT SHOULD INVESTORS DO NOW?
We would continue to hold as the firm is only part-way through its three-year transformation plan and there are still plenty of benefits to come.
The current consensus is for EPS (earnings per share) of 11.4p for the year to March 2025 and 12.7p for the year to March 2026, putting the shares on 11.7 times last year and 10.5 times this year, which looks too cheap to us.
With earnings continuing to beat expectations, analysts will need to keep upgrading their forecasts which means the shares should continue the re-rating process.
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