Motoring ahead

Wincanton offers equity holders a mixture of growth and returns well in excess of the prospects implied by its discounted valuation. We forecast three-year 3.0% operating profit growth and 8.6% EPS growth, strong cash generation, a 3.5% yield and low leverage at 0.5x net debt to EBITDA. The fact that, despite its strong outlook, the stock is trading at a 25% discount to its peers is a reflection of its large pension deficit and the fact that investor sentiment is yet to fully recover after its difficult period. In our view, this provides investors with an opportunity to enter the stock before it re-rates. There is 28.5% upside to our fair value of 329p.