Strong momentum and a raft of positive company announcements suggest there's much more to come from infrastructure and galvanising specialist Hill & Smith (HILS), which means the shares look enticing priced at just 14 times forecast earnings.
IC TIP:
Buy
at
705p
Tip style
Value
Risk rating
Medium
Timescale
Medium Term
Bull points
- Compelling valuation
- Earnings upgrades
- Supportive end markets in UK and US
- High-margin acquisition
Bear points
- Some oil and gas exposure
- French business struggling
Hill & Smith has benefited from a regular flow of EPS forecast upgrades since the start of 2014 (see graph below). We expect this trend, which has helped drive the shares upwards, to continue. The latest trigger for a 4 per cent upgrade to 2016 EPS forecasts was the group's acquisition late last month of UK galvanising company Premier for £15.5m - a price equivalent to 6.7 times enterprise value to forecast cash profits.