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magazineCaretech still offers good risk-reward
Caretech (CTH:AIM) 435p
Gain to date: 11%
Original entry point: Buy at 391p on 31 October 2019
The shares have done reasonably well against the backdrop of the recent market turmoil, despite having given back around 13% over the last two weeks. This makes intuitive sense as the company is relatively insulated from the problem areas affected by coronavirus.
Moreover the company, which provides social care and education services for adults and children, delivered what we described as ‘flawless execution’ when it reported full-year results on 12 December, beating analysts’ expectations.
Like-for-like growth of 6% was ahead of the market while earnings before interest, tax, depreciation and amortisation (EBITDA) margins improved and are well on the way towards the medium-term goal of 16%.
On 5 February the firm completed an investment in the United Arab Emirates (UAE) by securing a 51% interest in the largest provider of private outpatient mental health services in the country for £7.2m.
As well as providing growth capital the firm will leverage its 25 years of operational skills applied in the regulated UK market.
Meanwhile the £15bn UK market still offers a significant growth opportunity for the company, driven by the continuing trend for local councils to outsource in this niche sector.
SHARES SAYS: The growth opportunity remains intact and isn’t fully priced in. Keep buying.
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