Next Has Greater EPS Upside if Surplus Cash Used Toward Equity Investments

Dow Jones
Yesterday

0911 GMT - Next would benefit more from using excess cash toward equity investments as opposed to buying back shares, Citi analysts write as they upgrade their rating on the stock to buy from neutral. Citi also increases its target price to 184 pounds from 155 pounds. Citi notes that the retailer previously achieved a 25% return on equity investments and continues to look for investment opportunities to deploy surplus cash. While the bank's models don't assume any dealmaking, its analysis suggests that if half of the company's surplus cash is used for equity investments, fiscal 2027 earnings per share could increase by over 8% versus if all surplus cash were used for buybacks. The analysts add that if all surplus cash were used for equity investments, this would imply a 20% upside to FY27 EPS. Shares are up 1.9% at 155.65 pounds and 17% higher over the year to date.

 

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