Investing in companies with strong share price momentum can be an effective way of generating capital gains in the medium term. After all, as they often say in investment circles “the trend is your friend”. With that in mind, here’s two companies reporting half-year results today with healthy share price momentum.
Senior service
Engineering solutions provider Senior (LSE: SNR) designs, manufactures and markets high technology components and systems for the worldwide aerospace, defence, land vehicle and energy markets.
The company’s shares have fallen over the last 2.5 years on the back of declining profitability in its Flexonics division, as the land vehicle and industrial markets have remained subdued. However, it appears that sentiment towards the stock is improving, with the share price rising from around 170p back in November to over 250p today. Is there further to run?
This morning’s half-year results comprise a mixed bag of numbers. For example, on the positive side, revenue rose 13% to £510m, free cash flow rose a healthy 71% to £29.6m, and net debt was reduced by £26m to £181.6m. The interim dividend was also lifted 5% to 2.05p per share.
On the negative side, profit before tax and adjusted earnings per share fell 26% and 23%, respectively.
However, chief executive David Squires did sound confident about the future: “Looking further ahead we remain positive about future prospects with strong and visible growth in Aerospace and the anticipated recovery in Flexonics.”
The market appears to like the results and guidance, with the share price up around 4% today. And on a FY2018 P/E ratio of 16.5 and trailing yield of 2.6% the stock appears to offer reasonable value right now. As a result, I believe shares in Senior may be worth a closer look.
Get your Coats
Another stock exhibiting strong momentum right now is industrial thread manufacturing specialist Coats Group (LSE: COA), the 250-year old company supplying thread to customers including Adidas, Burberry and NEXT.
Coats shares have surged over the last 12 months, rising 160% from 30p to 78p, and the stock has recently re-entered the FTSE 250 index. The group released half-year results this morning and the numbers look healthy.
Revenue rose 5% on a constant exchange rate basis to $740m, and adjusted earnings per share rose a significant 38% to 3.06 cents. The group generated strong adjusted free cash flow of $109m, up from $84m, and the board raised the interim dividend by 7% to 0.44 cents. Chief executive Rajiv Sharma said: “We will look to build on the strong first half of the year, and expect to deliver performance in line with management’s expectations for the full year.”
Analysts expect Coats to generate earnings of 6.1 cents this year, up from 4.9 cents last year. At the current share price, that equates to a forward looking P/E ratio of 16.7. The company is also expected to boost its dividend considerably in coming years.
With that in mind, and given the fact the stock is now in the FTSE 250 index, I wouldn’t be surprised to see Coats shares continue rising, despite the impressive gain recorded over the last year.