Among todays small offering of company news, I cant help noticing a couple of firms whose share prices have been soaring along with their improving fundamentals.
Rental success
Wed all love a 75% profit in just a little over six months, wouldnt we? Thats what wed be sitting on if wed bought Ashtead Group (LSE: AHT) shares in February, which have now stormed to 1,350p. That includes a 7% boost on Thursday, on the day of the equipment rental firms first-quarter results.
The Q1 figures show a 12% rise in rental revenue to 660.8m, with underlying pre-tax profit up 4% to 183.6m and earnings per share also up 4%, to 24.2p. The results were boosted a little by the weakening of sterling, though chief executive Geoff Drabble said that was offset by lower gains on fleet disposals still, its a positive outcome from the Brexit vote and the cheaper pound will surely continue to help the company as it earns the bulk of its turnover in North America.
Mr Drabble went on to highlight the continued improvement in our margins, with the firms EBITDA margin now at a record 48%. Coupled with the intention to continue on a growth strategy through capital expenditure and acquisition (while still having enough left to engage in a share buyback programme), that gives me a bullish feeling about Ashtead.
My optimism is boosted by forward P/E multiples of 14 and 12.8 for this year and next, which looks pretty cheap for a company with EPS growth of more than 10% per year forecast Im really not surprised by the strong buy consensus from the Citys analysts.
Cleaning up
Supermarket own-brand products are big business these days, and thats helped manufacturer McBride (LSE: MCB) to an impressive share price performance. If youd bought the shares back in January 2015, youd be looking at a gain of around 120% at todays 168p price.
McBride, which makes household and personal care products, has been on a turnaround strategy in recent years after a big slump in 2013 and 2014, and its been paying off. After seeing EPS rise by more than 50% in 2015, McBride has just announced a further 34% EPS gain in the year just ended on 30 June. Revenue was down a bit, but we saw a 35% gain in adjusted pre-tax profit, with a 19% boost in operating cash flow to 52.5m and net debt slightly down to 90.9m.
Chief executive Rik De Vos enthused about the success of the turnaround, saying that the board remains confident in the opportunity ahead as we now move into the prepare phase now that the repair phase has concluded. So whats McBride looking like as an investment?
Though weve had that strong price performance, the shares still look good value to me, with forecasts for the next 12 months suggesting a forward P/E of a bit over 13. The dividend was reset to a low level in 2015 and has been maintained for 2016, but the company said it aims to get to payments on a two-to-three times cover basis. Forecasts of a 4.2p dividend for 2017 (for a yield of 2.5%) lie at the conservative end of that scale, so theres room for improvement there.
The weakness of sterling after the Brexit vote should help McBride too, and I foresee a few good years in the medium term.
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
