Broker snap: Carpetright's valuation unjustified

14th Dec 2010 10:56

Carpetright's interims came in lower than finnCap was expecting as the broker predicts that further downside risk remains.Carpet and floor coverings retailer Carpetright reported an adjusted interim pre-tax profit of £10m for the first half, below the broker's forecasts of £15m.While costs were broadly in line with its expectations, the broker notes that the group saw a sharp like-for-like sales decline resulting in lower-than-forecast expectations. Cash flow however was positive, with the group generating a net £12.8m in the period.Analyst David Stoddart says that news on the housing market remains discouraging, as the Royal Institution of Chartered Surveyors showed lower house prices and lower agent's sales to stock ratios.The broker says while the company deserves a higher valuation to reflect its market-leading position, it cannot understand the extent of its premium to the sector, "surely not one of this scale".The broker confirms a 'sell' and target price of 535p.