Investors logged onto Sophos today, snapping up shares as they banked on higher margins from the cyber-security firm.
Morgan Stanley’s in-depth “X-ray” analysis suggested the market was underestimating the potential for higher margins.
Analyst Adam Wood said fast growth rates often obscure high margins under the surface because new business is expensive to win.
He reckons the FTSE 250 company, whose shares are already up 75% this year, can increase from 7% last year to as much as 27% once that growth steadies.
Wood’s screening of Sophos prompted him to put 100p on his target price to 550p today, which lifted the share price 7.8p, or 1.7%, to 462.4p putting it among the best performers on the mid-cap index.
The FTSE 100 continued to rise, climbing 34.72 points today to 7465.63, a rise of around 0.5%.
Ashtead, up 56.57p, or 3.4%, to 1706p, was the top riser on the back of strong financial results across the Pond from its main US rival United Rentals.
“We would expect this to be positive for Ashtead, and note that although underlying rates were down 0.6% during the quarter, this is an improvement on the first quarter and consistent with industry comments that the rate environment is improving,” Liberum said.
WPP, 29.47p better at 1579p, was hoisted higher by Publicis. Investors were optimistic about Sir Martin Sorrell’s advertising giant after its French rival managed to turn an underlying sales fall in the first quarter into a gain in the following quarter.
Mining giant Anglo American improved 11.06p, around 1%, to 1139p after a solid second-quarter production report, with rough diamond production at De Beers, Anglo’s diamond business, up 36% to 8.7 million carats.
Wounds-dressing firm ConvaTec dipped 2.12p to 307.88p as it unveiled a $120 million (£92.5 million) deal to buy Woodbury, a US firm behind incontinence and catheter products.
British American Tobacco was up 92p, or 1.7%, to 5380p after its £38 billion takeover of US rival Reynolds was given the green light by shareholders on both sides. The deal, which will create the world’s biggest tobacco company, will complete on Tuesday.
Schroders slipped 16p to 3341p after Barclays turned bearish on the asset management giant. The investment bank’s downgrade to Underweight was based on concerns about weaker profit growth.
First-half profits at kitchen fitter Howden Joinery fell 12% to £65.6 million, but the decline was smaller than expected, helping it notch up an 11.88p rise to 439.1p.
At the smaller end of the scale, podcasts site Audioboom edged up 0.07p, or 3%, to 2.07p amid signs it is starting to convert users into revenues, which surged 460% in the first half to £1.8 million.