RWS (LSE: RWS), which released a trading update today, is one of the 10 biggest companies on London’s junior AIM market. Indeed, if it were to move to the main market it would sit comfortably in the middle of the FTSE 250.
Since its 2003 flotation, it has posted 14 successive years of growth in sales, profits and dividends. Today’s update told us the group “performed in line with the board’s expectations” in the three months to December and that it’s “confident of further substantial progress in 2018.”
World leader
RWS is the world’s leading provider of intellectual property support services (patent translations, international patent filing solutions and searches). It’s also a market leader in life sciences translations and specialist language services in other technical areas.
The company’s success has been built on organic growth, complemented by selective acquisitions that have strengthened its market-leading position. Its recent $320m acquisition of localisation services specialist Moravia adds an additional profitable, cash-generative division of scale to the group, and further broadens and deepens its business and geographical diversification.
Far too cheap?
The good start to the current financial year reported today prompted little change in the share price (currently 425p, market cap £1.2bn) but puts RWS on track to meet full-year expectations.
City analysts are forecasting earnings per share (EPS) of 18.4p — 29% ahead of last year. The price-to-earnings (P/E) ratio is a tad over 23, while the P/E-to-earnings growth (PEG) ratio is 0.8, which is comfortably on the ‘good value’ side of the PEG ‘fair value’ marker of one. A forecast dividend of 7.85p gives a modest yield of 1.8% but with EPS growing fast, the payout is too. I believe RWS is trading far too cheaply and I rate the stock a ‘buy’.
Premier recovery stock
The progress of main-market-listed FTSE SmallCap firm Premier Oil (LSE: PMO) hasn’t been anything like as smooth as RWS’s. Indeed, it was in the FTSE 250 index, until the collapse of the oil price a few years ago sent its share price and market cap tumbling.
Premier managed to survive the oil rout, thanks to supportive lenders and the outlook is now considerably brighter in an improved oil price environment. The company said in a trading update in November that it’s on track to meet (previously increased) guidance of 75,000 to 80,000 barrels a day for 2017. It also advised that it expects to report 2017 year-end net debt below the $2.8bn level of 30 September.
Also far too cheap?
In December, Premier announced first oil from its Catcher field. It expects production from the Catcher area to increase to 60,000 barrels a day (30,000 net to the company) during the first half of 2018, which it says will help accelerate debt reduction through the course of the year.
City analysts are forecasting EPS of $0.24 (17.3p at current exchange rates) for 2018. At a current share price of 72p, the market cap is £545m and the P/E is just 4.2. With debt now falling, Premier is another stock that looks far too cheap to my eye and one I rate a ‘buy’.
