Warpaint to Outperform – Berenberg

Berenberg analysts predicted a surge for Warpaint (LON: W7L) shares in a note this week, outlining reasons why the company is poised to outperform the market. 

Warpaint shares gained more than 2% Thursday following the note, closing the session at 430p. The stock is up more than 13% this year, but over the last 12 months, it has performed tremendously, climbing 132.4%. 

Berenberg maintained its Buy rating and 550p per share price target on the stock. 

“We expect Warpaint to continue to outperform its weighted end-market as it further expands its store estate presence among its existing base of major customers, coupled with significant new customer wins,” said Berenberg. 

Warpaint's gross margin is expected to expand further due to volume's emergence as the key driver of weighted end-market growth. The firm notes that changes in weighted end-market volume growth have been “highly correlated” to changes in the company's product gross margin, and Berenberg expects this to continue. 

Warpaint's margin should also be supported by structural improvements in the business. Berenberg analysts also highlight the company's low capital investment intensity has resulted in a high degree of free cash flow conversion and consistent dividends. 

“We expect dividends to continue to provide shareholders with a dividend yield in excess of peers,” concluded Berenberg.