Capita Plc (LON: CPI) - Valuation (30-Sep-2021)

Capita (aka 'Crapita') is clawing its way out of a debt trap. The company has been reinvesting in its sales function, efficiency and its reputation, but will it be enough to stop revenue attrition?

Summary

Capita (aka 'Crapita') is clawing its way out of a debt trap. The company has been reinvesting in its sales function, efficiency and in boosting its reputation. This plan will be enough to stop revenue attrition, and the company will return to organic growth. The industry is growing slowly, and Capita is coming from a handicapped position, continuing to lose some market share. But, as costs normalise and the business restructuring is complete, margins will stabilise. Moreover, by focusing on projects with larger margins, the company will stall margin decline. However, the debt burden is still substantial and increases their chance of collapse.

Market Price = £0.52
Estimated Value = £0.89
Monte-Carlo Price Percentile = 25%
Rating At Current Price = ADD

I will be adding a small Capita position to my portfolio because my valuation suggests evidence of moderate undervaluation.