THG: Future Returns Will Depend On Sustained Margin Execution

Analysts have raised their price target on THG from approximately $0.24 to $0.26 per share, citing a lower perceived risk profile and improving top line growth prospects despite slightly softer margin expectations.

Analyst Commentary

Recent Street research on THG highlights a more balanced, but still cautious, backdrop as the share price recovery narrows the upside from here. While some targets have moved higher, the overarching message is that easy gains have likely been realized and that further rerating will depend on sustained execution against growth and margin plans.

JPMorgan's upgrade of THG to Neutral from Underweight, alongside a higher price target of 43 GBp, up from 24 GBp, reflects recognition of operational improvements and a reduced downside skew. However, the new stance also signals that, at current levels, the risk reward profile is no longer compelling enough to justify a more positive rating without clearer evidence of durable earnings momentum.

Across the broader coverage universe, bearish analysts are emphasizing that THG's valuation has moved closer to fair value assumptions, compressing the margin for error around both growth delivery and cost discipline. As a result, investors are being encouraged to focus more closely on the visibility of revenue acceleration, the sustainability of any margin recovery, and management's ability to navigate a more competitive and potentially slower growth environment.

Bearish Takeaways

• Bearish analysts argue that the recent share price rebound has captured much of the near term turnaround story, leaving less upside unless THG can materially outperform current growth and margin expectations.
• There is concern that valuation has become more demanding relative to the still evolving execution track record, with limited tolerance for setbacks in cost control, platform efficiency, or strategic initiatives.
• Some cautious commentary points to lingering growth headwinds in core end markets, suggesting that top line acceleration could prove more gradual than the market is currently discounting.
• Bearish analysts also flag a more balanced risk reward profile, noting that with the most obvious improvements already priced in, any disappointment on earnings, cash generation, or guidance could trigger a sharper de rating.

What's in the News

• Company issues new second half 2025 revenue guidance, targeting THG Beauty growth of 1.0% to 3.0 percent and THG Nutrition growth of 10.0% to 12.0 percent, implying group revenue expansion of 3.9% to 5.9 percent (Company guidance).
• THG is added to the FTSE 250 Index, increasing its visibility and potential inclusion in more institutional portfolios (Index provider).
• THG is included in the FTSE 350 Index and the FTSE 350 excluding Investment Companies Index, further broadening its benchmark representation (Index provider).
• THG joins the FTSE 250 excluding Investment Companies Index, reinforcing its status as a core UK mid cap constituent (Index provider).

Valuation Changes

• Fair Value: risen slightly from £0.24 to £0.26 per share, reflecting a modest uplift in the perceived intrinsic value of THG.
• Discount Rate: fallen moderately from 12.94% to 11.70%, indicating a lower perceived risk profile and reduced cost of capital assumptions.
• Revenue Growth: increased meaningfully from 1.41% to 4.02%, signalling higher expectations for top line expansion.
• Net Profit Margin: edged down from 9.04% to 8.23%, implying slightly softer medium term profitability assumptions.
• Future P/E: moved up from 2.34x to 2.62x, pointing to a modest rerating in the multiple applied to forward earnings.