A year and a half ago, I thought Oxford Metrics (LSE: OMG) looked like an attractive UK share at 90p.
Today, the share price is around 89p. But, in fairness, the stock shot up to more than 125p in February immediately before the coronavirus crisis hit the markets.
Why Oxford Metrics is a share I’d buy now
I thought the business looked good in June 2019 and I still like the look of it today. However, Covid-19 has affected operations a bit as we can see in today’s results report covering the 12 months to 30 September.
Revenue slipped back by just over 14% compared to the prior year and earnings per share plunged by a little over 48%. However, the company managed to increase its net cash position by almost 8% to nearly £15m. That suggests a decent cash inflow performance in the period. And one of the things I like is the company carries no debt, apart from a few lease liabilities. Meanwhile, the directors held the ordinary dividend flat, so at least there wasn’t a cut for shareholders.
The company provides software for infrastructure asset management and motion measurement. Highways authorities use the product to manage their road networks. Hospitals and clinicians use the software to decide on therapeutic strategies. And Hollywood studios create “stunning” visual effects using Oxford Metric’s solutions. On top of that, the company reckons applications for the firm’s output are “growing all the time.”
And we can see evidence of the firm’s progress and expansion in the financial and trading record. Revenue and the shareholder dividend have been on a clear uptrend over the past five years. And City analysts following the firm have pencilled in robust double-digit percentage increases for earnings and the dividend in the current trading year to September 2021.
Growth ahead
The company serves clients in more than over 70 countries and chief executive Nick Bolton said in today’s report trading started well in the current trading year. Looking ahead, he thinks the firm’s strong balance sheet and “a tailwind from structural growth drivers” puts the business in a strong position to realise its expansion plans.
Meanwhile, with the share price at 89p, the forward-looking earnings multiple for the current year is just above 16 and the anticipated dividend yield is 2.8%. I’d buy a few of the shares with a holding period of at least five years in mind, and probably much longer than that.
But Oxford Metrics isn’t the only smaller company I’m keen on right now. When it comes to positioning my portfolio for the next bull run in 2021 and beyond I’d also consider technology tools and systems provider Oxford Instruments.
And I like the turnaround and growth stories unfolding in fast-moving consumer goods companies Premier Foods and mid-cap PZ Cussons. But I’m also considering making a broad-brush investment in smaller companies by buying a collective fund such the iShares MSCI UK Small Cap UCITS ETF.