JD Wetherspoon (JDW), the managed pub group led by Tim Martin, has the greatest growth potential and the highest returns in the sector, but one of the lowest valuation multiples, according to a new analysis note by the Royal Bank of Scotland (RBS). The bank, which placed Buy recommendations on four out of five stocks in the sector, said: “JDW’s sector-leading returns exemplify its focused but long-term approach. Growth is self-funded and is accelerating as momentum from the ramped-up opening programme builds. The balance sheet is robust and there may even be scope for modest share buybacks, in our view.” The note said that fund raising, more judicious investment and the mass disposal of poorly performing pubs had contributed to lower leverage ratios across the sector to “more reasonable levels over the last two years”. It said: “Returns on investment appear to have toughed, although there is a wide range of performance across the peer group. “Only one company, JDW, reined in capex ahead of the tough trading and now provides the highest investment returns among our coverage on our analysis.” RBS also placed Marston’s, Mitchells & Butlers (M&B) and Spirit on its Buy list, with share price targets of 135p, 500p and 75p respectively. Greene King was the only company that failed to receive a Buy recommendation and was rated as a Hold, with a target price of 480p. The note said: “Our lukewarm recommendation reflects uncertainty about the recent acquisitions and the risks related to potential future acquisitions. We prefer to wait and examine the size, price and profile of potential future acquisitions as they happen.” As for Spirit, the note said: “Our estimates assume Spirit to significantly narrow the trading gap with the managed pub, food-oriented peer group, but this is not without execution risk.”