Taking a fresh look at the UK mid-cap TMT sector, Berenberg has upgraded Computacenter and 4imprint to 'buy' from 'hold' and reversed that order as it downgraded Softcat.
With positive momentum for earnings per share within UK mid-cap stocks "currently hard to find" and valuations at all-time highs, Berenberg said these companies all have potential to sate investors' increased interest in companies with strong balance sheets that have scope for capital returns.
Direct marketing printing company 4imprint, which is the leading candidate for promotion to the FTSE 250 in the next quarterly review, has "always been" highly cash-generative though in recent years has prioritised fixing legacy pension issues, which have consumed cash.
"With the pension liability now materially de-risked, and small cash contributions fixed until 2023, 4imprint could be on the verge of returning cash to shareholders," analysts said, increasing their price target to 2,000p from 1,950p.
If paid as a special dividend, this could take the 2017 dividend yield to as high as around 5.5%.
"With a material acceleration in growth since the company's May AGM also, we think there is scope for earnings upgrades too."
A year after initiating coverage on Computacenter, the analysts have been impressed as the company achieved all of its market forecasts and more besides.
With upgrades at both its first quarter and interim results, its outlook is looking up, with the CEO announcing that the shift from Windows 7 to Windows 10 may be "the most significant business opportunity since Windows 1995".
From this, the analysts feel "it is clear that the requirement for its consultation and infrastructure services will only increase over the coming years".
Shares have climbed 13% since Friday's results, though the risk-reward is still felt to be in Computacenter's favour, with a guaranteed £100m capital return in the fourth quarter that could spark investor awareness in a stock that has been side-lined for the last few years, the analysts said, moving the price target to 1,200p from 750p.
Softcat was downgraded having risen around 25% since initiation in May last year and after a re-assessment on its valuation.
While Softcat is high-growth, generates strong cash flow and has returns upward of 50% and its premium rating "is deserved" due in part to the scope for cash returns, "we believe the shares
are fairly priced at these levels, particularly given that we are unsure of strategic changes that could come with a new CEO".