Two profit warnings in two months sees HSS Hire (HSS) chief executive Chris Davies depart after a disastrous seven months since listing.

Shares in HSS are down 70% from its 210p a share initial public offering in February mainly because of falling margins. Davies delivered impressive organic growth rates in the business which at 8.2% in the second quarter of 2014 still outstrips a number of UK sector peers.

But this was lower than the 13.1% delivered in the first quarter and is also being achieved at the expense of margins. Chief operating officer John Gill will take charge from today.

HSS Speedy chart

HSS's current valuation looks appropriate, according to analysts at Berenberg, who cut their price target from 200p a share to 60p after HSS's 26 August interim results.

Earnings per share (EPS) estimates were downgraded 74% in 2015, 43% in 2016 and 36% in 2017 to 2.7p, 7.9p and 11.4p a share, respectively.

Berenberg's 60p a share price target is derived by applying the UK equipment rental enterprise value to earnings before interest, tax and amortisation (EV/EBITA) multiple of 10.4 to its 2016 price target.

Average net debt and future provisions are also deducted to arrive at a 60p fair value estimate and a 'hold' rating. HSS has a market cap of £93 million and is the UK's largest tool hire firm after market leader Speedy Hire (SDY).

For more Shares Magazine coverage on HSS Hire click here.

Issue Date: 25 Sep 2015