Pace – Stock Analysis by Bargain Value
The last stock from our list is Pace (PIC), the company from the “Technology Hardware & Equipment” industry. It is involved mainly in telecommunication business. Provides technology solutions for the Pay television and broadband industries. Its offerings include Pay television hardware, set-up boxes, media servers and advanced Telco gateways, among others.
Purchase price (11.12.2015): 427.00 GBp
As usually, we are going to check the company’s performance in the category of revenues and net profit.
The middle-term, positive trend can be noticed. The revenue has started to rise since the second semester of 2008. It is strange taking into consideration the fact, that 2009 wasn’t very good for the UK economy. Although, Pace is an international company and operates in several countries. Diversification of the operating markets could be helpful in showing more stable performance.
On the net profit chart, we can notice even higher fluctuation:
However, the improvement is more visible, due to lower starting level. The first semester of 2015 has been outstanding (£ 57.52 ml in comparison to £32,15 ml in the same period of 2014). Although, the revenues in 2015 were not unusually high. In this situation, the real positive “villain” is second semester of 2014. The operational profits were almost 2 times higher (£62 ml), than a period before (£ 32.51 ml). What happened? The company has acquired “Aurora”, which has increased the profits, improved revenue mix, supply chain efficiency and operational efficiency. It was one time event with such a huge impact. We expect, that the results of this takeover will be seen in future too, but on a smaller scale.
Let’s talk about the profitability. How well the company uses its assets?
All indicators are great. The management of Pace knows how to extrude the business to the maximum. ROE, ROA and productivity are high above the averages for the market and the industry. The margins could be a little bit better, but still are exact the same as for the sector.
Moreover, we can see a much improvement for this two indicators:
They have been rising since 2012 and right now, are on the highest levels since 2004. We expect, that the tendency will be maintained, because of the synergy effect after the acquisition we have talked about earlier.
Let’s check, how the situation in the capital structure looks like. The total debt chart is presented below:
It is very high level of debt, close to the market average. The average for this industry is 2 times lower (30%). We would prefer a lower level of this indicator, to feel safer during harsh economic conditions.
However, the company don’t have any problem with paying back liabilities, which is presented on the current ratio chart:
The level of this indicator is healthy and it is much better situation, than in 2005 when it was a little bit to high. The average for the industry is once again a little bit higher (1.89), but we can live with this difference, especially that the tendency is for a growth.
The company’s cash flow are great and interesting:
We can notice to facts here:
- The company is really receiving the money, not only on paper.The operating flow is healthy,
- After a period of huge investments in 2011, the operating CF has been rising. In the last period we have similar situation and we can expect another boost in the nearest future.
The chart above has proven, that the Pace is a healthy enterprise and there is not too much to worry about in this moment.
Now, let’s check how high is the payment in dividend, that we may expect:
For sure, it is lower dividend than we have used to. In the last period, it fell down from 3.52 p to 3.09 p. Yield is very low because of that and rising stock price. In this category, the company is not very good, but still we can count on some payments per share in the future.
What about the value? Is it a bargain? Let’s check it in the table below:
The levels of all indicators show, that this is a true bargain. No other words are needed.
The last glimpse on the price chart:
The long-term trend is growing. We had a peak on 11th March 2011 and after this moment, the price has been moving in the channel from 292.00p up to 436.00p. However, there is a room for the bigger increase, even to the level of 490.00p and as we have seen before, the company is not overvalued.
Pace has proven, that we can expect good results from them. The revenues are stable and net profit should rise even more in the nearest future. The dividend level will not satisfy some kind of investors, but it possible that giving the low price of the stock, that the capital gains will be generous enough to cover this.
Current price (18.12.2015): 416.00 GBp (-2,64%)