It’s only a couple of years ago that Trifast (LSE: TRI) was priced at a growth stock premium, and by April 2018 the shares where commanding a P/E of 22. That was after having quadrupled in value over the previous five years, while posting regular progressive dividend rises.
But as so often happens with hot growth stocks, as soon as a bit of earnings weakness started to show, the share price crashed and today it’s down 40% from that peak.
The maker of upmarket fastenings experienced its latest price dip in October when a trading update spoke of a “challenging market environment” which had “continued into Q2” with “end markets across a number of sectors remaining weak.” But first-half figures released Tuesday didn’t look bad at all.
Holding up
Despite the tough economy, revenue held up pretty well, just 2.7% down on the same period a year previously. Underlying EPS took a bigger hit with a 9.4% drop, but cash generation still looks strong. The adoption of IFRS16 has led to a fall in reported cash conversion, but excluding that impact shows cash conversion slightly ahead.
Chairman Malcolm Diamond said: “After 10 years of continuous growth and strong cash generation, we have a very solid balance sheet,” with the company showing a net debt of £15.7m at 30 September. That’s only about 65% of the last full year’s operating profit, and with Trifast having a banking facility headroom of around £40m, it looks in good shape to me.
With the shares 1.6% down at 165p as I write and on a trailing P/E of 16 (forecasts probably need updating), Trifast looks a good long-term ISA pick, I feel — and there’s still plenty of time to use as much of your 2019-20 allowance as you can.
Fallen from growth
Computacenter (LSE: CCC) shares have had an erratic couple of years, falling heavily from a peak in July 2018. But they’ve come back strongly and trade at around 12% below that high point today.
As a result of a 17% rise in EPS in 2018, coupled with forecasts for further earnings growth of around 10% this year, the IT infrastructure services firm is looking at forward P/E multiples of 16 to 16.5. That’s a slight premium over the FTSE 100‘s long-term average, and we’re past what looked like super-cheap valuations in early 2019, but there are a couple more factors that convince me that Computacenter is an attractive long-term buy now.
Dividend
One is the dividend. Yields aren’t huge, with forecasts suggesting a modest 2.5%, but the 2018 dividend was covered 2.5 times by earnings and that level of cover continues into forecasts for this year and next. Then there’s the progressive nature of the payments. If the predicted 4.36p per share comes good this year, we’ll have seen dividend growth of 107% in the past five years.
I don’t want companies with big debt in my ISA, and Computacenter scores big on that too with net debt of just £3.1m at the halfway stage at 30 June.
The latest update on 30 October told us Computacenter has “comfortably beaten its prior year third quarter comparative with the positive momentum seen in the first six months of the year continuing throughout the quarter.”
I think this is an ISA stock to buy before the price starts climbing again.
