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Great Ideas update: RWS
RWS (RWS:AIM) 300p
Gain to date: 45.6%
Previous Shares view: Buy at 206p, 3 Mar 2016
A solid trading update (11 Oct) at translation specialist RWS (RWS:AIM) indicates its $70m (£57m) acquisition of US-based Corporate Translations Inc. (CTi) is delivering against expectations.
While we are now wary of the stock’s price at more than 30 times earnings, there is an argument RWS’s 10% compound annual growth rate in revenue over the last decade (excluding results to be reported) merits some sort of premium.
Chairman Andrew Brode says full year revenue in the year to 30 September is expected to be up at least 28% at not less than £122m when RWS reports full-year results on 6 December. Adjusted profit-before-tax is expected to be above £30.5m.
Earnings per share should come in around 9.5p, according to our calculations, up from 7.3p a year earlier helped by an 11-month contribution from CTi.
Analysts at Shore Capital estimate RWS has £100m of extra firepower to pursue further acquisitions, via its capacity to raise debt, and this could provide further upside for the share price. (WC)
We’re waiting for more detail at full-year results but on balance the trading update is positive.