Avon Technologies: Why Zeus Capital Says the Selloff is a Buying Ppportunity

Zeus Capital upgraded Avon Technologies (LON: AVON) to Buy from Hold on Tuesday, raising its price target to 1,900p from 1,850p and arguing that a recent share price selloff has created a compelling entry point for investors.

In a note from analyst Robin Byde, Zeus said Avon’s valuation has become increasingly attractive following weakness in the stock after interim results, with shares now trading at a 2026 calendar year price-to-earnings ratio of 18 times, falling to 16 times in 2027, which is materially below its five-year average of approximately 21 times and the broader European and U.S. aerospace and defense sector at around 20 times.

Zeus acknowledged that weaker-than-expected order intake weighed on sentiment, with group orders falling 31.6% to $117.9 million in the first half.

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However, the firm said “the order slowdown appears temporary,” pointing to one-off factors including U.S. government shutdown-related grant funding delays at Team Wendy and a tough prior-year comparison at Avon Protection.

Underlying first-half performance was strong, with revenue rising 6.8% to $160.8 million and adjusted operating profit jumping 39.4% to $24.4 million, pushing margins to 15.2% from 11.8%.

Zeus also flagged M&A as a potential additional catalyst, noting that “management appears increasingly confident on resuming acquisitions, supported by lower-than-expected net debt.”

The firm forecast approximately 60% profit growth over the fiscal 2024 to 2028 period, compared with around 40% for a basket of significant UK-listed defense peers.

The analyst listed several reasons to buy Avon technology shares now, including management’s track record, returns and growth, order recovery, M&A being back on the agenda, global defence tailwinds and the current valuation.