Good morning! The futures have rebounded quite strongly overnight, so the mood of despair, even slight panic that seemed to be setting in yesterday should abate today. It will be interesting to see which stocks rebound the most this morning - as that will show where the pent-up buying interest is.

I'm glad to have made it to the weekend without another profit warning anyway - although I suppose there's still time...


Avon Rubber (LON:AVON)

Share price: 654p
No. shares: 31.0m
Market Cap: £202.7m

Trading update - all trading statements should be presented like this - i.e. summary of the key points in the first paragraph, then more detail below - that way readers can instantly ascertain how to interpret the information, without having to wade through a load of positives & negatives, wondering what the conclusion is.

So the key first paragraph says;

Avon is pleased to report that trading in the second half of the financial year has continued to be strong. Currency headwinds have also reduced since the trading update made on 5 August 2014. The Board therefore expects that the full year result will be comfortably ahead of current market expectations.

The year end of 30 Sep 2014 has just passed, so barring any audit adjustments, they should know pretty much where they are.

Valuation - broker estimates at the moment are for 37.6p EPS, so "comfortably ahead" might mean about 10% perhaps? So the ballpark is probably 40-42p at a guess? That puts it on a PER of between 15.6 and 16.4, which is a fairly standard middle of the road price for a company of this size & type.

Checking my previous notes from nearly a year ago, I see that there is a relatively small pension deficit here that potential investors would need to check. It's always worth checking the last Annual Report (near the back of the notes usually) to ensure that the Balance Sheet deficit is not the tip of the iceberg, which it can be with some companies.

Another issue to check is that last year the company capitalised £4.7m costs into intangible assets. This boosts profits of course, so if it is done aggressively, it can lead to investors over-valuing the company (i.e. valuing it on a multiple of inflated profits).

Outlook - nothing is said today about the outlook, so I suppose commentary on that will come with…

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