Why Domino Printing Sciences Plc Plummeted

Domino Printing Sciences Plc (LON: DNO) will face earnings pressure in 2015.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 24 June, 2014 9:49 am BST

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.

What: Shares of barcode printer maker Domino Printing (LSE: DNO) fell by 13% to 639p during early trade this morning after warning results next year could be “broadly similar” to 2014. Pricing pressure in Asia and other developing markets and the need to invest further in R&D will put downward pressure on earnings, although “longer term” the board remains optimistic.

So what: The FTSE 250 company grew sales by 11% in the six months to the end of April, benefiting from increased consumer confidence and a general increase in capital investment. Underlying pre-tax profit rose to £27.5m from £25m a year earlier and the firm is “pleased with progress” this year so far.

To maintain product leadership and competitive advantage, however, ongoing investment is required. Domino spent £8.9m on R&D and remains on track to deliver new products over the next two years. A number of products were unveiled during the period including inkjet, laser and thermal transfer printers.

Now what: Domino Printing is cash positive and should meet expectations for the full year. The interim dividend of 8p per share (2013: 7.6p) will be paid to all shareholders on the register at close of business on 11 July. Analysts expect the firm to deliver a full-year dividend of 22.7p, which after this morning’s price movement would yield 3.6%. The dividend has prospective cover of 1.7 times earnings.