RBC Capital starts Mitie at 'outperform', says it's 'fundamentally undervalued'

RBC Capital Markets initiated coverage of facilities management firm MITIE Group Plc   Follow on Thursday with an 'outperform' rating and 195p price target.
"Mitie has aligned services with high-growth macro-trends, driving a record £33bn pipeline that feeds a £16.5bn order book, having grown circa 45% since the F2025-27E strategic plan launch," the bank said.

"We see Mitie as a good defensive play, delivering 11% earnings growth (2year-CAGR) and 5%/year shareholder returns."

RBC said forecasts indicate Mitie is on track to achieve free cash flow targets of £120m and £150m in F2026E/F2027E.

"As infill M&A remains a core priority, our forecasts suggest Mitie can invest up to circa £75m/year using FCF and available debt funding, and still remain within its target leverage range of 0.75-1.5x," the bank said.

This translates to revenue and operating profit growth of about 4% a year from acquisitions, supporting return on invested capital consistently above 20%.

RBC said its forecast of about 5% F2026 shareholder return includes a dividend payout of 30-40%, and the current £100m share buyback.

"We view Mitie as currently fundamentally undervalued, and we expect a multiple re-rating on Mitie shares as it executes on its strategic plan," it said.