- Diploma
- 11 September 2025 10:16:40
Source: Sharecast
Diploma, a decentralised, value-added distributor of specialist products, focuses on what it calls "small yet critical" components. The nature of the components provided means that Diploma serves customers' opex budgets, not capex budgets, offering "a high degree of insulation" from the economic cycle.
Berenberg noted that Diploma has guided to 5%-plus organic growth per year, operating margins of more than 20% and over 90% free cash flow conversion, with cash proceeds being used to drive further M&A.
"The quality of Diploma’s earnings has significantly (and we think structurally) improved in recent years, and the group now sits firmly in the FTSE 100. As such, we think there is merit in comparing Diploma with a peer set of leading global compounders. In light of this evolved peer set, the significant capacity for M&A, and likely upside risk to outer-year organic forecasts, we increase our price target to 6,350p," said Berenberg.
"We forecast Diploma to have leverage of 0.8x net debt/EBITDA at the end of FY25, offering significant firepower for M&A and meaningful upside risk to our forecasts. At the same time, we think an organic recovery in the Seals division will offset the impact of any eventual slowdown in Peerless's momentum."
Reporting by Iain Gilbert at Sharecast.com