Good morning! It looks as if everyone is back at their desks today, as my monitor is showing volumes back to normal, and a number of early risers from things that have been tipped over the holiday period in newspapers, magazines & tipsheets. I can't help feeling that this looks a very frothy market at the moment - in many cases valuations are becoming stretched in growth companies, with momentum seemingly having taken on a life of its own in many stocks. That makes me very worried about a sharp correction being overdue in a lot of these fashionable stocks. The market is rewarding a lot of people who are making fundamentally bad decisions at the moment, and this really does remind me of 1998-1999 in flavour - people are buying into attractive stories rather than attractive valuations.

 

 

 

Recruitment & staff outsourcing group, Staffline (LON:STAF) issues a trading update today, for the year ended 31 Dec 2013. It all sounds good, with a nice clear statement saying;

 

The Board today confirms that earnings for the full year will be in line with market expectations with good levels of growth in activity being seen across all divisions of the business driven by continued strong demand for Staffline's services.

 

That's a good example of how less is more with trading updates. No ifs or buts, just trading in line with expectations, and good growth in activity. I like it. Looking at valuation, it seems fairly reasonable.

Stockopedia shows EPS broker consensus forecasts of 40.6p for calendar 2013, and 45.4p for this new year. So at 546p the shares are not expensive on an earnings multiple of about 12. See the usual traffic lights graphic for valuation on the right.

The dividend yield is forecast at 1.93%, not terribly exciting, but for a growth company not too bad - as the dividend has been rising at about 14% p.a. in the last 2 years (and was doubled the year before that).

So this is a good example of how a growing company grows into its valuation.

There might still be some lingering worries over a recent TV documentary that apparently showed the company in a bad light (I didn't see it). I also have some…

Unlock the rest of this article with a 14 day trial

Already have an account?
Login here