Is it worth buying shares in Begbies Traynor?

Times

10-07-2025

In the boom times for the economy, insolvency specialists are left twiddling their thumbs. But in an era of — at best — sluggish growth, high borrowing costs and tariff uncertainty they come into their own, just take the case of Begbies Traynor.
The insolvency specialist recently beat City expectations for its full-year results, helping lift its shares to around 120p, meaning the group's stock price has been boosted by almost 27 per cent so far this year.
Is there still room for improvement in the company's share price? Analysts at Canaccord Genuity seem to think so as they have given the stock a target price of 157p. They say that the group is a 'well-run, dependable business' that has been delivering results either in line with or slightly ahead of City analysts' expectations.
• Begbies Traynor profit surges on lucrative large-scale failures
Jamie Murray, an analyst at Shore Capital, has also pointed out that the group has been trading at a discount to its average level over the past five years. Begbies Traynor was trading at a price-to-earnings multiple of around 9.4x ahead of its latest results, and following the increase in its share price, the group is now trading at 10.3x, as compared to its five-year average of 13x. Murray said that this multiple looks 'increasingly unjustified' given the group's ability to continue to increase its size through mergers, and the consistency in its financial performance.
Begbies Traynor has been buying up smaller business recovery firms around the country, most recently with the purchases of White Maund, a business recovery firm in Brighton, and West Advisory, a rival based in the Midlands. Berenberg's analysts note the company has a 'robust track record' with its acquisition strategy, and is adept at picking out targets that add value to the company's pre-existing operations. Given the group has only drawn down £7 million from debt facilities worth £35 million, analysts think there is plenty more room for making well-judged additions to the group's portfolio.
However, the firm's success will also depend on whether it can drive improvements from the assets it has already acquired, rather than just its ability to successfully acquire more. Begbies Traynor's organic sales performance indicates it has been successful in its underlying performance. The group delivered organic sales growth of 10 per cent in the 12 months to April 30. Analysts at Berenberg reckon this organic growth was the 'highlight' of the insolvency firm's most recent results, and they stated this intrinsic growth was likely to prove sustainable.
The insolvency market itself is growing as the corporate world continues to run off the support provided by the government during the pandemic. The UK saw a 15 per cent rise in the number of insolvencies in May, and a 4 per cent rise in the year so far, suggesting a strong level of demand for services provided by Begbies Traynor. The number of company administrations is particularly important for restructuring companies because the larger cases run for longer, offering more billable hours, with some of the biggest cases stretching on for several years. Data from the Insolvency Service shows that the number of administrations has grown from 114 in February to 136 in May.
Begbies Traynor will need to show it can secure these appointments to benefit from what analysts describe as the 'structural tailwind'. The insolvency specialist stated in its results this week that it was seeing success in winning the larger fee-earning work. The company is expecting to deliver higher fees from working on cases such as Speciality Steels, part of the steel operations run by Sanjeev Gupta, and Caskade, a KFC franchisee with more than 1,000 restaurants.
Berenberg's analysts have said that these more complex appointments underpinned management's confidence in reaching the higher end of revenue guidance for next year, and they have pencilled in a 5.8 per cent growth in revenues to £163 million from £154 million.
Begbies Traynor's shares have put in a strong performance in recent weeks as the market reacted to its full-year trading update, which was published towards the end of May, as well as the official publication of its results on Tuesday. The stock has seen a strong level of appreciation as the market starts to recognise the group's performance. Therefore, its current share price does not represent the best buying opportunity the stock has seen so far this year, but on current forecasts the investors who already hold the stock are likely to benefit from remaining invested.
Advice: HoldWhy: Expect further uplift driven by strong demand for its services