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Castings (LON:CGS)

Share price: 402p
No. shares: 43.6m
Market Cap: £175.3m

This company is an iron castings & machinery business. It's track record in recent years has been really excellent, and overall it looks a smashing business, with a strong Balance Sheet. It scores highly on Stockopedia, with a StockRank of 95, and high quality scores too. The valuation appears reasonable too. So that's a good starting point.

The problem is that the company has repeatedly stated that it has an uncertain outlook. Top marks for being open & honest, but it's clearly a worry that if profits are unsustainable, and/or totally unpredictable, then how on earth do you value the company?

Interim results - for the six months to 30 Sep 2014 are issued this morning, at 9am. Annoyingly, this company ignores market convention of putting out results at 7am (so that everyone has an hour to read them before the market opens) and instead inconveniences investors by issuing its results at 9am, when the market is already open. This causes unnecessary stress to investors, and gives a potential advantage to people who happen to be looking at their screen at 9am on results day. It's just bad practice. Results should always be issued at 7am, to give everyone a fair chance to read the figures before making any decision on whether they want to buy or sell when the market opens at 8am. Almost everyone else report figures at 7am, so why is this company different?

Profitability & Outlook - profit has fallen 12.9% from £9.6m in H1 of 2013, to £8.3m in H1 of this year. Although it looks as if the company has correctly guided down market expectations in the past, as they comment today;

It was reported at our Annual General Meeting in August that sales were below our expectations. Market forecasts of an increase in volumes in the third quarter of 2014 did not materialise. Forward schedules suggest a reduction in demand.

With the increasing concern over the strength of the recovery in Europe it is difficult to forecast the outcome for the remainder of the year. However, the directors anticipate that the year end results will be in-line with current market expectations.

Valuation - broker estimates (confirmed above) for this year ending 31 Mar 2015, are for 32.4p EPS (down from 39.1p last year). So at the current share price…

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