Shares in Utilitywise jumped more than 25 per cent today following a tough week as analysts look towards long-term growth for the company.
The utility cost management consultancy's stock was up 25 per cent at 60p in afternoon trading after Michael Donnelly, analyst at Panmure Gordon, raised its target price to 88p.
The company's shares, which are listed on London's Alternative Investment Market (Aim), tumbled around 40 per cent last week following a material reduction to historical revenues and profits. Through Utilitywise's business model, commissions are recorded as income well before the cash is handed over.
"We have long argued that such a restatement was inevitable, but taking the hit in the balance sheet means they will miss the 2017 dividend (to which the market has reacted with customary alacrity)," Donnelly said.
Although shares remain 85 per cent down from Utilitywise's peak price of more than 350p in 2014, Donnelly said a "potentially valuable business emerges as the fog of overstated earnings begins to clear".
Robin Speakman, analyst at Shore Capital Markets, added that the business faces a positive market environment after its new management team faced a challenging few months.
Risk is high, as are potential rewards as and when Utilitywise begins to rebuild. Taking a long term view, we retain our "buy" stance.