Deutsche Bank upgraded DiscoverIE Group Plc (LON:DSCV) to “buy” from “hold” and lifted its price target to 850p from 735p, noting the stock’s 20% decline year-to-date performance and disconnect between earnings and valuation. 

Shares of the UK-based company were up 2.4% at 03:58 ET (08:58 GMT).

Analyst James Beard said DiscoverIE is the only company in the brokerage’s UK electricals peer group that has seen 12-month EPS estimates rise while its share price has fallen. 

Beard attributed the weakness to slower organic revenue growth and increased investor concerns about cyclicality, alongside a slowdown in acquisitions. 

He said those factors have limited earnings upgrades but argued the market has overlooked the group’s profit resilience.

Beard said DiscoverIE has a long-term record of outperforming nominal GDP growth, lifting margins to meet increasingly ambitious targets and delivering about 15% pre-tax ROCE despite a larger capital base created through acquisitions. He said those elements merit renewed investor attention.

The upgrade formed part of Deutsche Bank’s Business Services 2026 outlook, which highlighted valuation pressure across the sector. 

David Brockton said cycle risk, market uncertainty and execution issues have weighed on sentiment in 2025, but he pointed to undervalued companies positioned for stronger performance next year. 

He said about 60% of the brokerage’s coverage is trading below historic multiples, with 40% more than 20% cheaper.

Brockton said many services groups are capital-light and cash-generative, supplying essential or non-discretionary functions with limited cyclicality and long-term growth prospects. He said the low valuations are contributing to de-equitisation across the sector.