Are mid-cap growth favourites Redde (LSE: REDD), Spirent Communications (LSE: SPT) and Playtech (LSE: PTEC) a buy after today’s results?
Redde
Redde appears to be a good example of how an accident management and legal services company should be run. There are no Quindell-style concerns here, at least not if today’s interim results are anything to go by.
Sales rose by 35% to £165.2m during the first half, while adjusted pre-tax profit rose by 51% to £17.3m. Better still was news that net cash flow from operating activities rose by 15% to £18.6m, providing cash backing for the firm’s profits.
Today’s results reveal that adjusted earnings per share rose by 13.7% to 4.89p during the first half. This suggests to me that Redde could beat current full-year forecasts for earnings of 8.9p per share.
Even though the stock now trades on a demanding 21 times forecast earnings, Redde’s income appeal also remains strong.
The interim dividend was increased by 12.5% to 4.5p in today’s results. If the final payout rises by the same amount, then Redde will pay a dividend of 9.3p this year, giving a prospective yield of 4.9%.
Spirent Communications
Shares in mobile network testing specialist Spirent rose by 6% this morning after the firm issued a solid set of full-year results. After a poor first half in 2015 — which triggered August’s profit warning — trading appears to have improved during the second half of the year.
Spirent reported adjusted earnings of $0.05 per share, beating forecasts of $0.04 per share. Last year’s dividend payment of 3.89 cents per share was left unchanged and net cash rose to $102m, from $99.8m at the end of 2014.
In today’s results, Spirent confirmed that it expects 2016 results to be in line with expectations. If so, earnings per share could rise to six cents per share this year, giving a forecast P/E of 19. The dividend is likely to remain flat once more, leaving the shares on a 3.4% yield.
Is Spirent a buy? The stock isn’t cheap, but Spirent generates plenty of cash, has no debt and pays an attractive yield. I believe the shares could be a decent growth buy.
Playtech
Online gaming software specialist Playtech has been a more profitable investment than many of its customers over the last few years. Today’s results suggest this trend may continue.
Full-year revenue rose by 38% to €630.1m, while adjusted net profit rose by 8% to €205.9m. Earnings per share were 3% higher at €0.675, in line with expectations. The full-year dividend was increased by 8% to €0.285, giving a yield of 2.7%.
Playtech said that profit growth lagged revenues because of £/€ exchange rate effects and the new UK point-of-consumption tax on gambling machines. Earnings per share growth of around 10% is expected this year, but I think the group’s real appeal lies in its €857.9m net cash balance.
Playtech said today that discussions are ongoing for a number of potential acquisitions. The firm said that if these aren’t successful, then it may return some of its cash to shareholders.
Playtech shares currently trade on a fairly undemanding 14 times 2016 forecast earnings. I suspect they could be a profitable buy at today’s prices.