Shares in technology and financial services provider Computershare Limited (ASX: CPU) are surging higher today and now trade more than 5% in the green at $20.72.
After a slight stumble, the Computershare share price went vertical in late January, soaring off a low point of $19.12 to trade back near its record highs once again.
All of this price action has caught the attention of analysts at Swiss Investment bank UBS in a note today. The broker revised its Computershare rating from neutral to buy today. Let's take a closer look.
Are Computershare shares a buy?
According to the team at UBS, the recent pullback in Computershare's stock presents as a potential buying opportunity for investors.
UBS adds that the prospects for capital gains are further increased now that Computershare has settled the spate of acquisitions and portfolio updates it recently made.
Now that the fog has cleared on these transactions, UBS reckons the company's earnings profile is far more visible – a fact that had been compressing the share price in the broker's estimation.
Not only that, the broker forecasts that several of these acquisitions will be beneficial to liftoff margin pressures throughout the company's P&L. It also likes Computershare's market position to capture shifting consumer trends in the mortgage market.
The broker upgraded its rating on Computershare to a buy and raised its valuation on the company by 27% to $22.50 in its most recent model update.
Morgan Stanley is also bullish on the company, rating the stock a buy as well. Analysts at the firm reckon that management could upgrade earnings per share (EPS) growth forecasts above the current 2% target.
According to a previous analysis by The Motley Fool, "the broker also bakes in its views on interest rates, treasury yields and cost-budgeting efforts by the company that could materialise in FY22 to support its thesis. This is relevant to Computershare given its exposure to interest rates at the belly of the interest rate curve, particularly up to 5-years, which are incredibly attractive to Morgan Stanley".
As such, the broker estimates a 10% growth in EPS for the company from each year into FY22–FY24 and values the company at $21.50 per share.
Computershare share price snapshot
In the last 12 months, the Computershare share price has gained more than 44% after rallying 4% in the past month.
Shares have started the year strongly and have climbed more than 8% this past week, outpacing the benchmark S&P/ASX 200 Index (ASX: XJO)'s return in that time.
