RM (LON:RM.) lists itself in the software sector, where it provides a variety of services to education. Its foru segments are: Education Technology, Managed Services, Education Resources, and Education Software.

With a market cap of £105m, it has net cash of £52m and a P/FCF of 3.3, PE 8.79 and EV/Sales of 0.18. That’s cheap! Analysts expect EPS to reduce 52% next year due to restructuring costs. So 2014 will be a mess. EPS for y/e 20 Nov 2015 is expected to be 10.5p, putting it on a forward PE of 10.7. Sharelock Holmes puts its current EV/EBITDA at 2.54, whilst Stockopedia puts it on 2.85. That’s really very cheap, not withstanding the fact that we expect 2014 to look nasty. Stockopedia gives it a stock rank of 99, and it passes 4 screens.

Investors Chronicle tipped it recently: “Clearly, RM has lots of work to do, but the transformation towards becoming a focused provider of higher-margin software and services will be worth it. Company profits will grow much faster and shareholder returns should, too. That’s why buying ahead of the restructuring, and possible return of that substantial cash pile, makes sense. Buy.”

Their summary pretty much echoes my sentiments as to what’s going on in RM. I don’t mind “a lot of work”, providing the work pays off. 2 directors have bought £145k worth of shares between them, which is encouraging.

To me, it looks like a good turnaround play with the directors pointing the ship in the right direction, and a cheap valuation.

I am a holder.


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