JD Wetherspoon's financial year has got off to a great start and the pubs group is the cheapest stock in the sector, according to Jefferies.

Full-year earnings beat consensus estimates by around 5% with pre-tax profits (pre-exceptionals) coming in at £72.4m, up 8.4% year-on-year. Meanwhile, like-for-like (LFL) sales increased by 3.2%.

For the six weeks to September 6th (start of the new financial year), LFL sales increased by a "very strong" 8.4%, Jefferies said. However, the broker notes that these were helped by the one-off effects of the Olympics and Paralympics and this trend "cannot be extrapolated".

Nevertheless, Jefferies said: "There is no explicit guidance in the statement but we are comfortable with our FY13 forecast for LFL sales of c2%, which may yet prove to be conservative."

The broker says that JD Wetherspoon's valuation is the lowest in the peer group despite a 13% compound earnings per share (EPS) growth rate (FY12-14).

"We remain positive on JD Wetherspoon due to its capital discipline, especially after the company cut the opening programme earlier this year (from 50 per annum to 25) to protect investment returns."

By 10:49, shares were up 4.65% at 482p.

BC

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