Micro Focus is looking pretty good right now as one to own if you have to own stocks.
Interims came in well ahead of expectations... with $135m odd in revenue, and margins up to 40% ... the margin trend is seriously impressive. rising steadily from 26% in 2006. This is a seriously good company, with ROE impressive at 45%, and eps rising from 9.7p in 05 to 20p in 08.
They had 23p of cash on the b/s at 04/08 and net borrowings of - £46m ... yes that's negative borrowings. But also most of their earnings are in dollars, as the pound has crashed, it can only be a good thing for reported earnings.
Not only are the fundamentals looking strong both at snapshot and trend levels, but also the chart is looking pretty good too. At interims they bounced off the lower trend line that's been steady for several years and really the stock is only 10% off it's high if you discount a spike in 2007.
What I really liked though was it's extreme strength today, when the rest of the market suffered horribly. The only other risers in the FTSE 350 were bombed out stocks... and there were only about 15 risers. So it looks as if it's getting institutional backing and that it's bottomed.
The p/e may not be to everyone's taste at about 17 times... but sometimes you have to pay up for good businesses, and it looks to me that microfocus is extremely well managed and could be a leader in a market rally.
