- New buy and build acquisition strategy driving eps momentum.
- Organic revenue growth, too.
- Lowly PE rating and high prospective dividend yield.
It’s not often that you get the opportunity to buy shares in a company on a forward PE ratio of six that is projected to deliver a dividend yield of almost nine per cent, but that’s what one small cap industrial stock offers investors. It’s not as if earnings have stalled - quite the opposite, as a buy and build strategy is set to deliver 63 per cent EPS growth over the 2023 and 2024 financial years. There is decent organic sales growth, too, as recent interim results highlighted. For good measure, six directors hold 19 per cent of the shares, so there is reason to expect the progressive dividend policy will be maintained.
The company is reaping synergy benefits from a buy and build acquisition strategy, producing organic growth, managing its cost base well (fixed electricity costs and an easing in raw material costs) and retains a well-funded balance sheet to facilitate further earnings accretive bolt-on acquisitions.
The lack of institutional following and a small enterprise valuation of £19.4mn are the key reasons why the group is below the radar of investors rather than operational underperformance since the board embarked on their buy and build strategy two years ago. It’s a rating worth taking advantage of as the potential for strong earnings growth and acquisition driven earnings upgrades could support a material re-rating.
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