It's always nice to get an upside Earnings Surprise because the share price heads northwards for a number of weeks after the announcement. But how to identify such a company remains difficult. A good guide is recent past performance and positive Director outlook information, but sometimes it's a case of reading between the RNS lines.
So with this in mind I am going to turn my crystal ball to Zytronic ZYT£ who report their Interim results in 2 weeks, on 17th May. For those who may not be familiar ZYT is a flat screen manufacturer in the north of England, which specialises in large bespoke industrial touch screens.
Recent ZYT Performance?
Sales: 2015 full year results produced sales up +12.7% with a strong (improving) Q4. Market growth for touch screens is projected to average +10-15%/annum, yet the ZYT average broker 2016 sales forecast is up just +5%, (less than half the projected market growth/annum).
EPS Growth: +25% EPS growth in the last 2015 results and ZYT easily passes the challenging Stocko Can-Slim screen for rapid growing companies. The 2016 broker EPS forecast is just +3.5% and this in turn creates a forward PE that may turn out to artificially high. The ZYT forward Stocko PER is 15.8, but the company holds some 20% of its Market Cap as cash, so arguably two PER "adjustments" are necessary here.
Rankings: ZYT achieve a Quality score of 99 and a SR of 94 putting it up there with the top 5% or so of market potential.
F-Score: 9/9 - Every F-Score financial metric was improved in 2015, with only 30 other companies from the whole of the stock market currently achieving this distinction.
Director Speak?
February's 2016 Trading RNS.... trading and future prospects remain in line with management's expectations.
This is a very similar trading update to Feb 2015.... the first months of the current financial year continues to be ahead of the comparable period last year and in line with management's expectations.
In both year's the February Trading updates are relative to "Management" rather than Market expectations. So no mention of market expectations, but surely ZYT "Management" expectations will be aligned to projected flat screen market growth of >10%/annum. The May 2015 Interim results produced circa +13% increase in both interim sales and EPS% - Is interim history about to repeat itself?
New Business: At the same time as…
