#12: Northern Bear - raising the roof

This is #12 in our "Twelve Stocks of Christmas 2025" Series. You can review the full set here.

The Pitch

Northern Bear (LON:NTBR) is an AIM-listed specialist building and support services group. With a StockRank of 99. While this may be a relatively unknown microcap in the wider investing universe, many subscribers will be aware of this SuperStock due to its high score in all of the QVM Ranks. It is rare to see a company where the share price has doubled in the last year, still trading on a mid-single-digit earnings multiple.

The Big Picture

Northern Bear is my Momentum pick for the “12 Stocks of Christmas” with a Momentum Rank of 93.

• Smooth Trend: Ed has written about the importance of smoothness when it comes to trending stock prices, and I’ve shown how investors can measure how closely price action matches a line-of-best-fit using an R-squared value. In this case, the figure of 0.90 suggests that this is a stock where the trend is definitely your friend:

• Balance sheet reborn: I have been sceptical about the balance sheet strength in the past, as trade payables have often exceeded trade receivables. This didn’t leave much leeway should the company have issues with being paid, or suffer from an onerous contract. While the current ratio is still only just above 1, the company had £3.8m of cash at 30 September, giving enough headroom that I no longer consider this too risky to invest. Instead, it gives them scope to expand via acquisition, or return cash to shareholders as a special dividend, as they have happily done in the past.

Going Deeper

Northern Bear has been listed since 2007. The aim of the business was to consolidate independent specialist contractors under a single strategic umbrella, combining their operational expertise with centralised finance and governance. Initially, the focus was on roofing contractors with Isoler, Springs Roofing, and Wensley Roofing forming the foundation of its group structure.

From the beginning, Northern Bear’s strategy has emphasised the autonomous operation of subsidiary companies backed by central guidance and financial planning. Over time, it added capabilities in electrical contracting, fire protection, materials handling and building services, mostly through acquisition. Geographically, their focus remains on Northern England. One subsidiary, H. Peel & Sons, undertook interior fit-out projects throughout the wider UK, but this was closed in FY25.

Northern Bear’s operating model consists of a holding company and roughly ten subsidiaries. These cover three principal segments:

• Roofing Activities: providing slating, tiling, leadwork, felt roofing, refurbishment, maintenance and more recently, renewable roof installations like solar panels.
• Materials Handling Activities: supplying, maintaining and renting forklift trucks and warehouse equipment.
• Specialist Building Services: which include electrical contracting, fire protection, building maintenance and refurbishment, sound insulation, and consultancy services in health & safety and environmental compliance.

There are a couple of reasons that Northern Bear looks likely to be an outperformer in 2026:

• Earnings as well as price Momentum: while price momentum alone can be a good indicator of positive future returns, it can also add to the risk of overvaluation if it isn’t backed by fundamentals. In this case, the company has seen several broker upgrades since the summer for both forward years:

• Still very cheap: FY26 forecasts put this on a P/E of less than 5. Forecasts for declining EPS in FY27 will see the P/E rise to around 6.5x. However, the company is cautious about providing forward guidance, and EPS figures may be upgraded in time.

What The Brokers Say

There is just a single broker here, with Hybridan highlighting the company’s improving quality of earnings and lack of debt. They point out that the forecast P/E of 6x for FY26 is significantly lower than the 10.8x weighted average for the construction services sector. They believe a higher P/E rating is warranted.

The Bear Case

Investors need to be wary about a couple of factors that may impact trading, or the percpetion of the business:

• Poor disclosure: the company’s reporting leaves something to be desired, in my opinion. This year’s H1 operating profit figure included £1.3m that “arose from the Group's normal trading activities”. However, they give us no clue what this actually was, and then don’t exclude it from “adjusted” operating profit.
• Weather: There is no doubt that dry weather benefits this company. A significant proportion of their business is still in the roofing segment, which requires dry conditions to operate effectively. While the Summer period was very dry, Autumn was wetter. It is probably too soon to call whether this will have been a headwind for the company in H2.
• Lack of competitive advantage: While the individual subsidiaries of the group may benefit from the centralised procurement, finance and planning functions, compared to stand-alone operations, there is no unique product here. To generate higher returns compared to competitors, the company will rely on brand and operational excellence as its main advantages. These are not typically the strongest, meaning long-term average returns on capital are unimpressive.

The Bottom Line

While the company looks conservatively financed and has improving prospects, the lack of a unique product means that it will never be the highest-quality business. However, it doesn’t need a huge competitive advantage to be a good investment. Strong earnings Momentum means that this is very cheaply valued, despite a rising share price over the last year. This share price Momentum points towards further possible gains in 2026.