Good morning!

 

 

Northbridge Industrial Services (LON:NBI)

This is an equipment hire company. An AGM trading statement has been issued this morning, which says;

 

As indicated at the time of our Preliminary results in April, we have enjoyed a good start to 2014, with a strong first quarter and continuing contributions from both sales and rental activities. Our cash flow remains strong which will enable net gearing to reduce further by the end of 2014. We are pleased with the Group's progress so far this year and continue to be confident in the Group's prospects. We expect results for 2014 as a whole to be in line with management's expectations.

 

That all seems nice and clear, with none of the weasel words that are so often present in trading statements.

 

 

Looking at valuation, it seems reasonable to me - there are plenty of green bars in the usual Stockopedia graphics on the left.

Note that the "Quality" section at the bottom is either green or dark green, so strong ratings there. So you would expect this company to command a premium valuation.

However, the forward PER of 12.8 is actually quite modest in today's market (where PERs are generally too high, in my opinion).

The only item that disappoints me is the dividend yield, although that can be forgiven since this company is clearly concentrating on growth, having made acquisitions, and growing turnover and profits strongly over the last five years.

 

Although do note that the company seems rather too keen on issuing new shares - the number of shares in issue has grown by an average of 15.7% every year since 2008, which dilutes EPS as the company grows. You can see that from the Stockopedia graphs below, which show that profit tripled (from £2m to £6m) over the years shown, but EPS only went up about 50% (from 20p to 30p).

You often find that management are too trigger happy to issue new shares at companies where they personally only have very small shareholdings - so they are more interested in growing the size of the company, and their remuneration, than worrying about dilution for existing shareholders.

I've…

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