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magazineRenishaw’s rating haircut may not be over
Investors in science-based engineering group Renishaw (RSW) have been left stunned by the big sell-off in the share price in the wake of half year results on 25 January.
While those figures were impressive and demand continues to be firm, the company’s valuation is being called into question. The stock slumped nearly 15% on the day from £56.40. The shares currently change hands for £49.12.
Renishaw is a world leading developer and manufacturer of high precision, automated metrology equipment, or very high-specification measurement kit. Products are used widely in aerospace, automotive, healthcare and other industrial markets.
The half year results showed 20% organic growth in revenue to £279m, while high margin after-sales work helped pre-tax profit jump 70% to £62.3m. Dividends were raised 12% to 14p per share.
The company’s expertise is not in doubt but unpredictability remains a long-run problem. Renishaw has a long history of surprising the market both positively and negatively and management admit little more than six weeks visibility on its order book.
Even after the latest share price sell-off the stock continues to trade at a hefty premium to peers, about 40% to 45% on a price to earnings measure, based on next 12 months data from Reuters.
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