Softcat’s Strong Performance and Valuation Constraints Justify Hold Rating

Softcat (SCT – Research Report), the Technology sector company, was revisited by a Wall Street analyst yesterday. Analyst Adam Wood from Morgan Stanley maintained a Hold rating on the stock and has a p1,595.00 price target.

Adam Wood has given his Hold rating due to a combination of factors that reflect both positive performance and valuation considerations. Softcat has shown strong growth in gross and operating profits, driven by larger solutions projects, which led to an upgraded outlook for FY25. The company’s board is optimistic, expecting low-teens growth in operating profit, which aligns with current market forecasts.
Despite these positive indicators, the stock’s valuation appears to be a limiting factor for a more bullish rating. Softcat trades at approximately 23.2 times the adjusted P/E for CY26, which suggests that the stock may already be fairly valued at its current price. This valuation, combined with the anticipated modest upgrades to consensus estimates, supports a Hold rating as the stock may not offer significant upside potential in the near term.

In another report released today, Deutsche Bank also maintained a Hold rating on the stock with a £18.30 price target.

SCT’s price has also changed moderately for the past six months – from p1586.000 to p1793.000, which is a 13.05% increase.