Smith 28 Jun 2014 11:31
27/6/14
Shares of DS Smith have risen by quite a bit since the start of 2013, but now is not the time to go short. The maker of corrugated packaging saw annual pre-tax profits leap by 104% last year, to reach £167m, thanks to the acquisition of SCA Packaging, which increased its presence in Scandinavia and northern Europe. That transaction has met almost all of its financial targets, in terms of increasing organic sales, returns on sales and cost savings.
Furthermore, the stock's pay-out is set to track growth in earnings per share. Those are expected to grow by between 15% to 20% per year as additional cost savings kick in. For some analysts the current premium in the share price relative to the sector is only justified by further M&A, but at 11.5 times' this year's earnings and on a forward yield of a little more than 4% the stock remains a long-term buy, even if further progress may be slower, says The Times's Tempus.