RE: PAUL SCOTT comments..23 Jun 2022 10:33
MORE......of a very long posting - too long to post here
EPS fell, but that’s because of last year’s negative tax charge, which we already knew about, so no surprises there. Underlying EPS rose 6.3% once this tax effect is stripped out.
Underlying diluted (for share options) EPS was 25.2 US cents, or 20.6p in sterling.
Stockopedia shows 25.9 US cents broker consensus, so a slight miss, but a note from Liberum this morning says the results are ahead of its expectations. So I’ll probably just view it as in line.
PER is 11.7, based on FY 3/2022 actual EPS of 20.6p - that’s great value for a resilient, growing group.
Of course, earnings are likely to continue growing (organic & acquisitions), and a new 5-year plan is announced, with a target to double revenues to $1.2bn by FY 3/2027, at a operating margin of 9-10% (similar to what is currently being achieved). Hence there’s scope for this share to double earnings, and I suggest, re-rate onto a higher PER than 11.7 also, giving the possibility that this share could double or triple in the next few years. Also bear in mind, it over-achieved against the last plan, and has established a track record for making good acquisitions, which is not reflected in the current valuation.
Cost inflation (copper, plastic & wages mainly) is passed through to customers, with a lag, since contracts already factor in price rises either quarterly or annually. Copper rose a lot in 2020 & 2021, but has more recently been falling. Volex took all that in its stride, so this share looks a lot safer than many investors imagined, with chat on bulletin boards often focused on the price of copper, and some people selling the shares because they wrongly imagined it would hit profits at Volex.
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