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Rising Review Price breached - Renew Holdings

Renew Holdings (RNWH.L; Aim UK 50. Market capitalisation: £662m, 844.5p, 4.3% of JIC Portfolio. Medium Risk/High Reward = 5.0% target weight)


Renew Holdings plc operates as a contractor in engineering services and specialist building. The Company's segments include Engineering Services, which comprises the engineering activities, which are characterized using the Company's engineering workforce, supplemented by specialist subcontractors where appropriate, in a range of civil, mechanical and electrical engineering applications.


Rising Review Price breached - hooray!


At 838p, Renew Holdings is above my RRP of 825p.


There is good momentum in the share price and the business. Over the last year, earnings forecasts have been consistently upgraded - it’s a well-managed business. The question is what price one should pay for it.


It has a high-quality score (91) on Stockopedia. The return on capital and equity is good at 29.7 per cent and 28.7 per cent, respectively. An operating margin of 6.4 per cent is not as high as expected for a high-quality business but is pretty good compared to the sector. Margins have also more than doubled since 2018, hence compound EPS growth of 14 per cent off the back of 11 per cent compound revenue growth. Forecasts are for only 4 per cent EPS growth this year to September 2024 and next to September 2025. However, I expect it to do much better than that and, as in previous years, to see upgrades.

The numbers below are from the COVID-19 low.

I am today raising the target Rising Review Price to 950p. At 950p, it would be valued at 14.8x September 2024 earnings and on a yield of 2.0 per cent.

The Falling Review Price also rises, to 676p.


Except during COVID, the yield has rarely been lower than 2.0 per cent, and the PE ratio above the mid-teens. When the share price reaches 950p, I anticipate the earnings and dividend forecasts will be upgraded.


So, I'm holding on in expectation of further share price appreciation. has it trading 16 per cent below its fair value estimate.


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