Its been a hugely disappointing year for investors in Judges Scientific (LSE: JDG), with shares in the scientific instrument designer and manufacturer falling by 35% since the turn of the year. Indeed, shares in the company are down 14% today after releasing an update that, while showing it has had a record first half of the year, highlights the challenges that the company faces and the caution that management has about its future.
Despite this, Judges Scientific could be worth buying for these three reasons.
A Strong Track Record
Judges Scientifics ability to identify lucrative businesses and buy them has produced highly impressive results over the last five years. The company has grown the bottom line in each one of those five years, with it averaging growth of 37% per annum over the period.
This is extremely impressive and, while management is being cautious regarding the current market conditions for its products, investors should gain confidence from the fact that Judges Scientific is a relatively stable company that has a proven history of delivering strong growth numbers.
A Better 2015
While 2014 is expected to be a disappointing year, with earnings per share (EPS) set to fall by 14%, Judges Scientific is forecast to bounce back in 2015. Indeed, earnings are due to be 15% higher in 2015, which makes up for almost all of this years fall and, if met, would put the company on a strong growth trajectory once more.
Clearly, sentiment is likely to be dampened by a difficult 2014 but, once the market looks ahead to next year, sentiment could improve and arrest the decline of the companys share price that has taken place during 2014.
While shares in Judges Scientific are by no means cheap, they do offer good value when the companys growth potential is taken into account. For instance, they trade on a price to earnings (P/E) ratio of 15.5 but, when 2015s growth forecasts are taken into account, it equates to a price to earnings growth (PEG) ratio of 1. This shows that, while not cheap, Judges Scientific does offer growth at a reasonable price.
Of course, with market conditions remaining challenging, there will inevitably be lumps and bumps along the way. However, Judges Scientific appears to be well placed to resume its long term growth status and seems to offer good value for money when that is taken into account.
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Peter Stephens does not own shares in Judges Scientific.