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SCT: Rising Dividends Will Drive Attractive Future Shareholder Returns

Dividend Increases And Acquisitions Will Drive Shareholder Returns This Year

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SCT
AnalystConsensusTarget
Not Invested
Published 18 Dec 2024

Update shared on 20 Dec 2025

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-6.4%
7D
-1.4%

Narrative Update on Analyst Price Target

Analysts have modestly increased their price target for Softcat, citing a slightly higher expected future price-to-earnings multiple and broadly unchanged growth and profitability assumptions that together support an updated valuation of approximately £18.27 per share.

What's in the News

  • Softcat confirmed earnings guidance for fiscal 2026, reiterating that underlying operating profit growth is expected to be weighted toward the first half due to the timing of large projects in FY2025 and FY2026 (company guidance).
  • The company is actively pursuing further acquisitions after completing its first deal, the purchase of data and AI services firm Oakland, and is exploring additional capability bolt ons and international expansion opportunities (results presentation).
  • Management highlighted the United States as a key focus area, noting that Softcat could acquire an established US operation to accelerate growth, provided any target closely aligns with the group’s people centric culture (results presentation).
  • The Board recommended a final ordinary dividend of 20.4 pence per share for FY2025, up from 18.1 pence in FY2024, taking the total annual dividend to 29.3 pence per share, subject to shareholder approval (company announcement).
  • A special dividend of 16.1 pence per share has also been proposed for FY2025, to be paid alongside the final dividend, lifting total cash returned to shareholders since listing to £661.9 million if approved (company announcement).

Valuation Changes

  • Fair Value: Unchanged at approximately £18.27 per share, reflecting stable underlying valuation assumptions.
  • Discount Rate: Risen slightly from 9.31% to about 9.32%, indicating a marginally higher required return.
  • Revenue Growth: Effectively unchanged at around 5.63%, with only an immaterial downward adjustment.
  • Net Profit Margin: Edged down slightly from about 9.91% to 9.89%, implying a modestly more conservative profitability outlook.
  • Future P/E: Increased slightly from 27.73x to approximately 27.80x, supporting the updated valuation despite minimal changes to fundamentals.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.