Full-year results from Consort Medical(LSE: CSRT) on Thursday saw it boasting of "another year of good growth in revenue and profit," but there's a bit more to it than that.
While, on an underlying basis, revenue rose by 4.4% to £311m and EBIT gained 5.3% to £42.7m, adjusted EPS actually dipped by 0.9% to 64.5p. On a statutory basis, pre-tax profit fell by 21% to £17.3m, but the underlying figure showed a 7.3% rise.
Consort, which bills itself as a "leading, global, single source drug and delivery device company," had been growing its earnings per share strongly in the preceding few years, and the share price has been following nicely -- up 77% over five years to 1,218p.
Though this year's flattening of earnings might look disappointing, analysts are predicting growth of 9% per year for 2019 and 2020. And the dividend is growing progressively too -- while yields are still under 2%, the annual cash handout is appreciating nicely ahead of inflation.
Solid core business.
What I like about Consort is the nature of its business. It manufactures drugs and premium drug-delivery devices, so it can provide the whole package in one go -- and provides support to drug development companies for making an end-user product.
That makes Consort something of a picks-and-shovels company, the kind that can do well regardless of who's winning at the actual development end of the market. A number of its key customers seem to be doing very well with their pipelines too, and I can see good long-term prospects here.
On a valuation front, the shares are on a forecast P/E of 17 for 2019, dropping to 15.6 in 2020. Obviously, forecasts can go wrong, but that looks like an attractive valuation for a stock with what I believe to be strong growth potential.
Short-term growth dip?
Whenever I spot a soaring growth share chart, I'm always wary of what I see as a common happening. Often, investors can see no wrong, and as long as the company keeps meeting or even exceeding its challenging expectations, the shares keep on going up. But as soon as the first underperformance comes in, bang -- desertion and a big share price drop.
That happened to Proactis Holdings(LSE: PHD) in April, when the company reported higher than expected customer losses -- though profits at the interim stage were up nicely. The business management software company reckoned there will be an impact on the second half -- and on the day, the share price was slashed by 40%, from 190p to just 111p.
Analysts soon cut back their 2018 expectations to an EPS rise of just 4%, but the most recent forecasts suggest strong growth in 2019 with EPS putting on 23%. And with the firm's order book looking good, up to £47.8m at interim time, I see that as realistic.
I was alerted by the share price weakness bringing Proactis within the range of my growth share screen.
The shares are on a PEG multiple for 2019 of just 0.5 now, and anything below 0.7 can suggest strong growth prospects. And we're looking at a low forward P/E of just 11, significantly below the FTSE 100's long-term average.
Net debt of £29.8m at 31 January came after the acquisition of Perfect Commerce LLC for £94.3m, and with 2019 revenue forecast at more than £60m, I don't see that as a problem.
Looks like a future cash cow to me.
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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.