Goldman Sachs raised its rating on Shanks to 'buy' from 'neutral' after the waste group's shares fell following its abandonment of talks with private equity group Carlyle about a possible offer.
The broker notes that Shanks trades at 8.9 times earnings, a significant discount to both the wider utilities sector, which trades at 12.3 times earnings, and its historical multiples of about 11.4 times earnings.
'Shanks is among the most economically exposed stocks in the utilities sector, as its business is 100% waste, of which around 85% is non-municipal (and so more sensitive to industrial production cycles),' the broker says.
'Our economists expect a rebound in industrial activity in Shanks' key markets (Benelux and the UK), which should drive strong earnings growth at the company. We would also not rule out the possibility of further M&A activity in the next 12 months.'
Stockbroker tips from ShareCast
Broker snap: Goldman upgrades Shanks
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Market latest
FTSE 100 | FTSE 250 | All Share
| FTSE 100 | 5,901.07 |  |
+1.81% |
| FTSE 250 | 11,235.15 | |
+1.34% |
| FTSE All Share | 3,047.42 | |
+1.73% |
| Dow Jones | 12,862.23 | |
+1.23% |
| NASDAQ | 2,905.66 | |
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| Xetra DAX | 6,766.67 | |
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| Paris CAC 40 | 3,427.92 | |
+1.52% |
| Nikkei 225 | 8,831.93 |  |
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| Hang Seng | 20,756.98 | |
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Hang Seng disclaimer l Prices delayed by at least 15 minutes
FTSE 100
| Admiral Group | 1038.00 | |
+7.90% |
| Man Group | 136.70 | |
+7.81% |
| Smiths Group Plc | 1017.00 | |
+5.94% |
| Lloyds Banking Group plc | 34.39 | |
+5.07% |
| ITV plc | 79.35 | |
+4.75% |
| Petrofac | 1474.00 | |
-1.40% |
| BG Group plc | 1425.00 | |
-0.49% |
| Polymetal International plc | 1165.00 | |
-0.43% |
| Randgold Resources | 7400.00 | |
-0.27% |
| Royal Dutch Shell Plc | 2261.00 | |
-0.18% |
| Lloyds Banking Group plc | 309,113,680 |
| Royal Bank of Scotland | 130,453,278 |
| Vodafone Group Plc | 128,243,037 |
| Barclays plc | 59,662,740 |
| BT Group plc | 33,853,130 |
Articles on the economy and stock markets
Inflation falls at last
Wed 18 January 2012
With inflation finally falling, what does this mean for the economy and for investors? Ben Yearsley, Investment Manager discusses.
Where to invest in a recession
Tue 17 January 2012
It doesn't take an economist to see that the economic picture is fragile. But how bad are things likely to get, and what does it mean for investors? Ben Brettell, Economics Editor, examines the evidence.
Where to invest in 2012
Fri 13 January 2012
2012 starts where 2011 left off - with a huge degree of uncertainty for investors. Mark Dampier shares his thoughts on areas which could prosper this year.