Oxford Instruments(LSE: OXIG) shares have lagged the market today, following the release of the companys lacklustre full-year results.
Theproducer ofnanotechnology tools and parts for CT and MRI scanners revealed a24% fall in full-year pre-tax profit to 35.6m. On an organic constant currency basis, revenues declined by 5.4%. Adjusted earnings per share fell to 48.2p, from 67.6p as reported in the year-ago period.
Management blamed tough trading in Japan and Russia for this set of poor results, along with weaker-than-expected trading in the companys industrial analysis arm.
And to try and return to growth, Oxford has announced today that it is now planning to cut 160 jobs or 7% of its workforce. Moreover, management has raised Oxfords cost-cutting target from the 6m originallyforecast to 8m this year.
Growth at a reasonable price
Oxford had warned the market in January that its full-year results would miss expectations, but the market seems to have ignored the warning.
After falling by as much as a third in one day after issuing a profit warning at the end of January, Oxfords shares have rallied by 44% during the past five months. The companys shares are currently trading at a historic P/E of 20.4 based on todays results.
But City analysts are upbeat about the companys prospects. Indeed, City figures suggest that the companys earnings per share will jump by 21% this year. According to these numbers, Oxford is currently trading at a forward P/E of 18.6 and a PEG of 0.9 a PEG ratio of less than one signifies growth at a reasonable price.
Spill over effects
Oxfords troubles could be a sign of wider industry pressures, which would be bad news forPremier Farnell(LSE: PFL) andImagination Technologies(LSE: IMG).
That said, both Premier and Imagination already have their own fair share of problems.
For example, Premiers profits have now been sliding for three years straight. The company is struggling to cut costs fast enough to maintain profit margins.
Earlier this year the groups management announced that it was increasing itsannualised cost saving target to 10m-12m, compared to the previous target of 6m-8m.
Premier is currently trading at a forward P/E of 13.2 and supports a dividend yield of 5.3%. The payout is covered 1.3 times by earnings per share.
Disappointing
After issuing multiple profit warnings over the past few years,Imaginations shares have slumped a staggering 70% from their2012 high of 700p.
That said, the company has recently been the subject of takeoverrumours, with Apple being quoted as a potential suitor. Apple already owns around 10% ofImagination, and sales to Apple account for a third of Imaginations sales.
Nevertheless, as a standalone company, Imagination is hardly a top pick in my opinion.
City figures suggest that the company is trading at a forward P/E of 38 and earnings per share for the year to the end of April 2015 are set to fall 27%. Earnings are set to rebound by 34% to 7.9p during 2016, but this is still far off the peak of 10.10p per share reported for fiscal 2012.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares of Imagination Technologies and Apple. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
