Reporting season is a period of trepidation for those involved in bottom-up stock selection strategies. It is a period when share price movements can be extreme, depending on whether a company met the grade or missed expectations.
Here are four gems on our recommended list that have just delivered their results.
Appen provides language technology data and services, such as speech recognition and content relevance, to governments and companies. The company is suitable for growth investors looking to leverage the growing use of artificial intelligence in global language technology.
Delivering solid half-year earnings, management provided guidance for 2017-18 of underlying EBITDA in the range of $50 million-$55 million, based on an exchange rate to the US dollar of $US0.80. This would point to a 77.8 per cent to 95.6 per cent lift from the 2016-17 EBITDA of $28.1 million. We’re also happy to see Appen’s management continue to hold substantial amounts of stock with co-founder and chairman Christopher Vonwiller a significant investor.
Corporate Travel Management
Corporate Travel Management manages the purchase and delivery of travel services for the global corporate market and is one of our longer-serving star stocks. Corporate Travel commands a less than 1 per cent market share across the US, Europe and Asia, offering plenty of opportunity for increased global scale. The company is financially sound and grew earnings per share by 24.8 per cent in the six months to June.
The company reaffirmed 2017-18 guidance with EBITDA expected to be in the range of $120-125 million, implying growth of about 20 per cent. Management interests are aligned with shareholders as founder and chief executive Jamie Pherous continues to hold a large position in the stock.
Reliance Worldwide is a market leader in the plumbing industry through its unique “push to connect” fittings. At the interim result, the company reported a 24.5 per cent per cent growth in EBITDA on a return on equity of 17.8 per cent. The US makes up around 70 per cent of group sales and growth in this segment was a standout this period, with strong returns also coming from Europe, Middle East and Africa. As a result, Reliance Worldwide upgraded expectations for full-year EBITDA between $150 million and $155 million, up from between $145 million and $150 million.
Chairman Jonathan Munz retains 10 per cent of shares outstanding which were released from escrow on February 28. However, the chairman’s intention to realise his investment in the company was well flagged before listing.
Service Stream is involved in the construction and maintenance of fixed line and mobile networks. The rollout of the NBN is a reliable driver of revenue growth, particularly with its fixed communications business. This segment generates about two-thirds of its income from activations and is expected to increase this between now and the conclusion of the NBN rollout.
The share price was leading into the latest result, creating caution among many observers. However, a 48.5 per cent lift in annualised half-year earnings, and management expectations for full-year EBITDA to be about $64 million resulted in a change in sentiment and analyst upgrades. Particularly pleasing was the expectation that the earnings shortfall due to nbnTM Hybrid Fibre Coaxial activation will likely be offset by remediation works and other services in the second half of the year.