Dart (LSE: DTG) is beating the market today after the company issued an upbeat trading update. Specifically, Dart’s management now believes that group operating profit for the year ending 31 March 2015 will be ahead of current market expectations, as a result of lower-than-anticipated winter losses.
What’s more, Dart reported today that forward bookings for its Leisure and Travel business are encouraging. 50% of the summer season has already been sold, which puts the company ahead of where it was last year.
For the financial year to the end of March, Dart now expects to report operating profit excluding exceptional items in line with the £49.2m it posted last year.
Previously, the City had been expecting Dart to report a pre-tax profit of £39.7m for the financial year to the end of March. So analysts are going to have to adjust their forecasts based on today’s news.
However, while Dart is trading ahead of expectations, the company is still facing challenges. For example, the group’s fortunes are highly dependent upon the UK economic environment and even after factoring in the higher level of operating profit, Dart is trading at a relatively high earnings multiple.
In particular, based on the fact that the group reported earnings per share of 24.7p last year and a similar performance is now expected this year, Dart is trading at a forward P/E of 14.4. This is a high valuation for such a cyclical business and doesn’t leave much room for error if things go wrong.
Bright future
While Dart charges higher following an upbeat trading statement, AFC Energy’s (LSE: AFC) shares are continuing to push higher in anticipation of the group’s “imminent” commercial production.
The developer of alkaline fuel cell technology has hit several key milestones this year and company is almost ready to begin commercial production. Moreover, a few days ago AFC said it has signed a development agreement with two South Korean companies to deliver 50 megawatts of fuel cell generation capacity. This deal has the potential to generate $1bn in revenue over ten years.
For a company with a market capitalisation of only £57m at time of writing, a deal that could be worth around $1bn for AFC is clearly attracting investors to the company.
Nevertheless, AFC is facing many challenges and the company isn’t a sure thing just yet. For example, AFC is currently running low on cash and the company is issuing stock to fund its working capital requirements.
That being said, the group’s future should become clearer when it starts its POWER-UP programme in Germany later this year. AFC is expecting to generate up to 15 kilowatts of power from the programme in July. By the fourth quarter AFC expects to have reached commercial production levels.
