Broker snap: Rathbone's overvalued

KBC Peel Hunt likes fund manager Rathbone Brothers as a company but it does not like the shares at their current price, even after a set of interim results that were marginally ahead of expectations. "We previously downgraded our forecasts at the start of this month given the level of the equity market on the quarterly billing date of 30 June. Since then, markets have rebounded sharply (+9%) which, if maintained, would leave our forecasts too low. However, we are mindful of continuing volatility which will continue to impact reported results, particularly at the next billing date in September," advises KBC analyst Stuart Duncan. The stock is currently trading on a forward price/earnings ratio of 15.6, compared to a sub-sector average of 11.1. KBC regards Rathbone as "the quality play in the sector" but feels the current valuation offers little upside in the short term. Accordingly, with its price target left unchanged at 745p, the broker switches its recommendation on the stock from "hold" to "sell".