Seymour Pierce continues to think that fashion retailer SuperGroup is oversold, maintaining its 'buy' rating and 750p target price for the stock on Wednesday morning.

"The new management has 'steadied the ship'. With confidence returning, we believe the stock is oversold at 12.9 times FY13 earnings, considering the operational gearing in the earnings and possible step up in the growth rate," the broker said.

Seymour Pierce reckons that SuperGroup is capable of growing operating earnings by over 20% every year, from £42m last year to £75m over the next three years ("assuming sales grow by 12% per annum, and operating margins recover half the 'lost ground' over the last year, rising from 13.6% to 16.8% of sales").

Meanwhile, the company intends to open more stores in the UK, has the potential to improve profitability overseas and can increase its contribution from internet sales, the broker said.

"The model is attractive with material opportunities in categories such as denim and womenswear. Encouragingly, the new autumn/winter ranges (particularly in womenswear) look significantly better than previous seasons and we believe the steady delivery of results will drive a re-rating."

While the share price has recovered in the last quarter - from around 400p mid-July to 660p by yesterday's close - Seymour Pierce still says that the stock is "unfairly rated at a discount to UK and international peers".

By 11:00, shares were up 2.8% at 678.5p.

BC

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