Myriad Genetics Oversold

Molecular diagnostics test developer Myriad Genetics reported results in line. This is an attractive company and there are lots of growth opportunities here. Myriad is highly cash generative and is growing revenues in the high single digits. Earnings look set for low teens growth.

Thinking short to mid term, the company is cyclical in the sense that when the economy picks up, patients make more visits to doctor's offices. Similarly, patients may feel more inclined to make 'out of pocket' spending for tests when they have more income. In addition, the longer term picture is exciting and supports significant upside potential.

However, the cloud hanging over Myriad concerns future competition and possible future pricing pressure should the Court of Appeals for the Federal Circuit uphold the earlier District Court decision which ruled that 7 of Myriad's patents were invalid. You can find very good commentary on it here

I think any potential investor should understand both risk and reward.

My view is that it could be some time before rival tests approach Myriad's expertise and this will require significant investment. Establishing sales in Myriad products takes time as it is intrinsically difficult to convince people of the merits of preventative measures. Nonetheless, I will note that Myriad's sales growth seems to have disappointed analysts over the last year or so.



Myriad Genetics Q2 Earnings

A brief look at earnings and guidance. Myriad's year end is in June.

• Revenues of $104.4 vs. $98.9m estimates
• EPS of 26c in line with estimates
• Guidance: Full Year revenues $380-400m vs. $390m estimated
• Guidance: Full Year EPS of 95-100c vs. 102c estimated

The market might not like Myriad guiding EPS below consensus but, if the stock is marked down notably, I intend to buy some.

Growth Drivers for Myriad Genetics

Myriad specialises in genetic tests that analyse the risk of a person, with  hereditary cancer, developing the given condition. Over 96% of Myriad revenues are generated via insurance reimbursement and, this gives the company very favourable cash flow generation. Good receivables collection has seen receivables drop to a low of 37 days sales outstanding.

The two big revenue generators are BracAnalysis (ovarian Cancer) with 89% of revenues and Colaris/Colaris AP (colorectal and Uterine Cancer/ colorectal polyps) with 7% of revenues. In this quarter, BracAnalysis year on year sales grow by 8.5% and Colaris by 3%

Colaris sales figures are disappointing (they fell sequentially) and the management said this was more to do with 'timing issues' than underlying weakness. Overall, these are good sales results considering the company reported a drop in office visits in the quarter which could have been due to bad weather.

Turning to Myriad's strategic game plan to drive long term growth, it has four main points

1. Launch new tests
2. Grow existing product's range
3. Expand to become the leader in the companion product space
4. Expand into accommodative European markets

Myriad Achieving Strategic Aims

Looking at the objectives in turn, the management confirmed that a new test will be launched in the fall. To grow products range, Myriad is trying to get BracAnalysis classified as a 'preventative' treatment so that it can be covered under the affordable care act legislation. This would be 'significantly positive' for Myriad.

Another exciting development is the Myriad marketing follow up to a major study that supports the cost effectiveness of genetic testing for hereditary colon cancer. The study is linked here

Dr. Gruber and his colleagues used a mathematical model to determine the medical and cost effectiveness of colorectal cancer genetic screening based on a simple family history. The study determined that the average cost effectiveness ratio, a measure of expenditure per life year gained by genetic testing, would be $26,000, significantly less expensive than the often-quoted benchmark of $50,000. The study further suggested that risk-assessment should begin between the ages of 25 and 35, and that genetic testing would be appropriate for those individuals whose mutation risk is 5% or greater. The study estimated that approximately 1% of the U.S. population over the age of 25, or 2.0 million Americans, would meet this criteria resulting in a potential market of more than $6 billion dollars for Myriad's COLARIS test

I would take the $6bn figure with a pinch of salt. Myriad have previously said that the Colaris test is a $400m opportunity. Nevertheless, the cost effectiveness of preventative testing is becoming more wide spread with this sort of research.

 One new announcement on this study was that it was assessed on the basis of four genes tested with a cost up to $4000. Myriad's current test analysis three genes at a cost of $3100 and Myriad intend to add the fourth gene at a cost of $1400 by the end of the year.

Myriad continues to develop companion test but this requires ongoing scientific evidence to accelerate sales. The main focus being on PARP inhibitors.

The CEO thinks that Prolaris (launched 9 months ago) has a $740m opportunity and Ondose with $420m. However, sales expansion will require more evidence.


Myriad's European Expansion

I was quite impressed with the updates on this. Myriad is keen to 'significantly' enter Europe by the end of 2012. The key target markets will be Germany, Italy, Spain, France and Switzerland. Europe is seen as 75% of the size of the US market for Myriad.

The CEO declared that he was 'ahead of plans' in Europe and that he believes that Myriad's tests could get 2000 to 2500 Euros reimbursement, this is similar to current US reimbursement.

I think they will make an acquisition in Europe, in order to establish scale and distribution quickly.
40m revs, profitable

Myriad Evaluation

The stock trades at $22.41 with a market cap of $2.07bn and an Enterprise Value (EV) of $1.56bn. Myriad expects 88% gross margins. Free cash flow this has been estimated at $170m, putting Myriad on a FCF/EV= 10.9%

Forward PE ratio is at 22.41/.975=23x and the co has previously discussed giving cash back to shareholders. I would expect an earnings accretive acquisition in Europe by year end. The results were not blow out, but the long term picture looks good. On balance, the markdown today provides a decent buying opportunity, in my humble opinion.




If you like this article than why not add a twitter feed from 'EarningsView' by clicking on the 'birdie' link on the left border of this blog.  Alternatively, add us on facebook at 'Earnings View', whereby articles will be automatically linked.



.

Coach is a Luxury Retail Play Exposed to Fast Growing Emerging Markets

What the Chinese Middle Class Want

High end hand bags and accessory company Coach gave good earnings and demonstrated  that the high end of the retail market is where you should be looking to buy stocks in the sector. The dichotomy between the high and bottom end of retail has been previously discussed here

In summary, I think Coach is the sort of stock that would suit a lot of portfolios. Coach has a well regarded management team and the company has a number of profit drivers. In addition, many of these revenue streams are on fire at the moment. Coach generates a lot of cash and is a good stock to be looked at for inclusion in a Growth At Reasonable Price (GARP) structured portfolio.

Before I discuss the results, I want to describe the profit drivers.


Coach Profit Drivers

They are numerous and this is why Coach's stock has had such a great year

• Emerging middle class in China making aspiring to the Coach brand
• Recovery in discretionary spending at the high end of Western markets
• Shift of production to lower cost manufacturing centers
• Increasing online sales and opening men's stores
• Consumers 'traded down' during the recession and bought Coach instead of premium luxury brands like Louis Vuitton or Gucci

All of which, have contributed to Coach's top and bottom line. Coach is an established and very well regarded brand in Japan and, this has translated well over to China. There is potential for expansion in China as they only have 52 retail stores there, as opposed to 171 in Japan and a combined (retail & factory) of 478 in the US.

On a less positive note, they are exposed to rising raw material costs and they appear to have held back margins. Furthermore, any fashion business is exposed to the constant challenge to innovate and keep the brand popular.


Coach Q2 Earnings

A brief look at the earnings

• Gross Margins were flat at 72.4%
• Inventories rose 36%
• EPS diluted of $1 vs. 97c estimates
• Revenues increase 19% for the quarter
• Free cash flow of $382m for the quarter

Coach don't give EPS or revenue guidance but here are a few points from the conference call

• CapEx for 2011 forecast at $150m
• Gross Margins for 2011 forecast at 72-73%
• Operating Margin for 2011 seen flat at 31.5%
• High single digit same stores growth forecast for the rest of the year in North America

The market was disappointed with the flat gross margins in the quarter plus the outlook for margins in future. In this quarter margins were held back by a larger proportion of sales taking place lower margin factory stores. This could be a structural issue, but it appears unlikely. It could also be the phenomenon (which has been observed at Burberry in London) of a pick up in purchasing by Far Eastern purchasers who want to buy Coach products in 'bulk' at factory stores.


Higher Raw Material Costs

In addition, higher raw material costs are holding back margins and, this issue looks set to continue. Coach will have to rely upon top line sales growth, unless they can raise prices. The co could find this relatively difficult because they are known to be at the lower end of the luxury spectrum. The good news is that Coach is generating good top line sales growth at the moment.

Inventories were high in order to support a combination of the strong growth in sales in North America, new store openings and the Asian distribution center.


Coach Evaluation

Coach is exposed to good growth trends. Flat margins are a concern but, they are generating good top line growth. Trailing free cash flow is at $879m which puts them on a FCF/EV of 5.84% with a current stock price of $54 this looks good value, for a company set to grow earnings in the low teens. The main concern would be a dramatic fall off in demand in Asia, if China falls into a real estate slump. This is a possible outcome for 2011, but not one to worry about unduly for now.

Analysts have this on EPS of $2.89 and $3.29 to Jul 2011 and 2012 respectively. I think this is cheap. Nevertheless, I run a hedged portfolio and already hold Nordstrom in the retail space (less exposure to China) so I won't be picking up Coach just yet. However, I do think it deserves a good look and will put it on monitor. Should China appear to be successful at smoothing inflation/real estate markets than Coach will probably be bought if it is at this kind of evaluation.


If you like this article than why not add a twitter feed from 'EarningsView' by clicking on the 'birdie' link on the left border of this blog.  Alternatively, add us on facebook at 'Earnings View', whereby articles will be automatically linked.

Robert Half Weak Outlook?

Robert Half gave a mixed bag of results. I always believe in telling it like it is and, frankly, I think the stock will be down tomorrow. However, I don't things are as bad as the market might take them and any decline could create a decent buying opportunity. I've previously written about Robert Half here and focused on its correlation with strong employment gains in a recovery. The metrics cited in that post continue to improve.

However, in this post I want to talk about the specifics of these results.

Reported

• Q4 Revs of $851.6m vs. $831 estimates
• Q4 EPS of 17c vs. 16c estimates

Guidance

• Q1 2010 Revs of $850-900m vs. $836.2m estimates
• Q1 EPS of 13-18c vs. 18c estimates

Robert Half Q4 2009 Results

They beat handsomely on revs and income but I suspect the market isn't going to like the mid point of  Q1 guidance being below analyst estimates. Whichever way I look at it, I can't conclude otherwise. Margins look to be lower than analysts had forecast and, many of the questions on the conference call focused on the reasons for this.

Answering analysts questions on the subject of margins for Q1, the board mentioned the following

1. State unemployment tax rates are expected to increase at the same rate in 2011 as in 2010, so a 50-75bp reduction in sequential temp gross margins for Robert Half
2. Protiviti seasonality will result in a sequential 10% decline in revenues. This is at the midpoint of what they traditionally lose in this quarter.

Now given that, temporary and consultant staffing comprises 83.5% of operating income the forecast reduction in gross margin is significant. The Protiviti seasonality issue should be well known.


Conservative Guidance?

Robert Half estimates that State unemployment taxes will grow at the same rate as in 2010 (75bp hike) and ultimately your view on this guidance will depend upon your outlook for growth. Faster growth rates engender greater tax revenues and less need for tax hikes and they also bolster debt servicing abilities.

 I don't consider it apposite to 'second guess' Robert Half on this but merely point out the upside should the US continue on its accelerating growth path. They had this issue last year and it took them a while to recover, so perhaps they are being unduly conservative.

Moreover, looking at Robert Half guidance history for EPS (cents)...

 

	Q4 2009	Q1 2010	Q2 2010	Q3 2010	Q4 2010	Q1 2011
Market Estimate	5	6	7	13	16	18
Co Guidance	1 to 6	3 to 8	3 to 8	9 to 14	12 to 18	13 to 18
Actual	9	5	8	14	17
Actual/Co  %	160	40	100	100	83

....suggests that they tend to be conservative. In the last row, any number above 50% indicates that the actual result was above the midpoint of guidance. Nonetheless, the Q1 2011 guidance looks light.

It is a similar story with Revenues (m)


<><>

	Q4 2009	Q1 2010	Q2 2010	Q3 2010	Q4 2010	Q1 2011
Co Guidance	675 to 725	725 to 775	730 to 780	770 to 820	800 to 850	850 to 900
Actual	737	737	769.1	817.3	851.6
Actual/Co %	124	24	78	95	103

Robert Half Q1 earnings may well hit the high end of their guidance, particularly as employment gains look highly probable for the US economy, but I think the time to pick up the stock will be around then. I expect analysts to downgrade forecasts after this outlook.



If you like this article than why not add a twitter feed from 'EarningsView' by clicking on the 'birdie' link on the left border of this blog.  Alternatively, add us on facebook at 'Earnings View', whereby articles will be automatically linked.

Fortinet Delivers Strong Results

Fortinet delivered a super set of results and demonstrated that the IT security segment has the potential to be one of the fastest growing sectors in 2011.

I first featured Fortinet in a -more in depth- post linked here

I was very pleased with these results and will update this post again after I here the conference call later, so add this blog to your twitter feed by clicking the button on the left of this site if you want to keep updated. I bought some more stock .

Fortinet Earnings

The stock is up sharply as they simply blew away expectations

• Revs of  $93.6 vs. $86.7m estimates
• Non-GAAP EPS of 19c vs. 14c estimates

The reported non-GAAP was actually 22c but this included 3c of tax benefits, so I have excluded that to aid comparisons. These are superb numbers.

 In the previous analysis I argued that Fortinet was experiencing a number of favourable end demand drivers and also had great potential to deliver very strong earnings and cash flow growth due to opportunities of scale. It looks like they are beginning to deliver. I've updated numbers from the previous chart.

All the margins are moving in the right directions. The tax rate is likely to go up but I think it is likely that Fortinet can comfortably hit a 30% free cash flow margin next year. Moreover, in the latest results total year billings went up 33% year on year and sequentially by 17.2%

Evaluation

Incidentally, analysts currently have 16.9% revenue growth forecast for 2011 but this will be subject to revision. Given a free cash flow margin of 30% this would put the stock on a forward FCF/EV of 113/2210=5.1%  This is too cheap for a stock growing EBITDA in the mid teens. I think the stock has a lot further to run. I would consider a $42 target to be conservative.

Fortinet 2008 2009 2010 CheckPoint 2009 Revenue 211,791 252,115 324,696 791,147 Gross Mgn 71.10 72.24 73.58 85.58 SG&AMgn 49.27 45.55 41.37 30.00 R & D Mgn 17.49 16.74 15.33 9.71 Op Mgn 2.33 10.05 17.04 44.89 FCF Mgn 16.47 22.76 30.49 59.82

source: Fortinet, Earnings View

Schlumberger Gives a Balanced Outlook

Leading Oil services company Schlumberger gave results recently which beat estimates but were a little bit underwhelming in the outlook. Before I go into more detail, I should point out my view on Oil services companies.

 I see them as correlated plays on the current price of oil. In my experience they have a higher correlation to spot oil prices than exploration and production companies do. This is because the marginal increase in demand for their services comes from the short to mid term price movement in Oil. With regards exploration companies, they are more determined by longer term considerations because-even with substantive reserves-they don't realise those reserves at current prices. For the integrated majors, oil prices can be damaging to some aspects of their downstream business as high prices could curtail demand and margins.


Schlumberger Results

The point of looking at Schlumberger is to discern some industry outlooks that could give clues as to which oil services stock you favour, in order to manifest a viewpoint of higher prices. I've made a few bullet points from the results and conference call

• Co focused on Smiths integration
• Pricing and margin pressure seen in the second half
• Strong activity in oil field services in N America
• Oil field services strong in North Sea,West Africa, Middle East and Asia
• Weakness in Mexico oil field services
• Technical successes scanning,reservoir production and drilling offerings
• Strongest 2011 growth in deep water seen coming from West/East Africa
• Demand recovery not as strong with natural gas
• Increased supply of unconventional gas in the US and liquefied natural gas (LNG) worldwide seen as limiting price growth

Short term, Schlumberger was not optimistic that a 'major return' to work would come in the Gulf of Mexico. The markets that contain a significant amount of uncertainty are Iraq, Russia, Mexico and Brazil. Although I suspect the risks are on the upside here.


Conclusion

I think gas services continues to look weak and the outlook wasn't great. Schlumberger mentioned possible margin pressure in the second half, but this will largely be determined by the price of oil. With regards Oil services stocks, it suggests focusing on oil at the expense of gas plays.

I would be a bit cautious with the stocks that rely on new activity, such as Transocean. Furthermore, according to Schlumberger, it will be late 2011 or 2012 before activity picks up in deep water Gulf of Mexico work. Again, I would stay clear of these plays.

Overall, a pretty balanced outlook for 2011.

DNO International and Oil in Kurdistan

Oil explorer DNO International will have been glad to hear that Oil exports are expected to resume soon. The company was featured in an earlier article on stocks focused on oil in Kurdistan linked here

According to the Kurdistan Regional Government (KRG), oil exports are due to resume by February. From the press release from the KRG website

'At a joint press conference following the meeting, Prime Minister Maliki described their discussion as positive and said, “One of the meeting’s key achievements was agreeing on the resumption of oil exports from the Kurdistan Region.”

As well as deciding to resume Kurdistan’s oil exports, Prime Minister Salih and Prime Minister Maliki agreed that the Kurdistan Region will keep a share of its crude oil to supply its local refineries and power plants.'

This bodes well for the listed plays. As discussed previously, my favoured play is DNO International. DNO gave a guarded welcome to the news. According to a Reuters article

'There is definitely information that is still lacking here," said DNO spokesman Tom Bratlie. "It's not like we can just push a button. At the moment there are several issues that have to be agreed upon before we can start exports.'

which could be construed as negative news. However, I don't think it is unduly worrying.


Kurdistan Oil and Iraq

The process of horse-trading over the Iraqi 2011 budget is on-going and oil revenues are the critical issue. In the previous article, I highlighted some of the differences between the Iraqi Technical Service Contracts (TSC) and KRG Production Sharing Contracts (PSC). They appear to be similar and, I suspect that the will to adjust the PSCs from Baghdad, will not prove to be the issue at hand. I suspect the key issues between the KRG and Baghdad will relate to the relative percentages that each pay for the costs of development in Kurdistan. Naturally, the KRG will want them to be paid nationally, as their share of oil production is currently than their share of the Iraqi population.

If I am right, than the issue could be more about from who DNO get paid rather than how much etc. Moreover, Kurdistan is a land locked country, whose neighbours are hardly friendly and, view any aspirations to a Kurdistan state as being a  potential threat. I don't think Kurdistan is in any position to discourage foreign oil explorers, especially if they are allied to the countries they need to transport their oil.


DNO International and RAK Petroleum

One of the key attractions of DNO is that RAK Petroleum holds a strategic stake. They are seen as potential bidders and when/if  the issue of the Kurdistan agreements is finalised, I would expect speculation to increase. RAK Petroleum holds near 30% of DNO and has managed to get the Co's Group Commercial Director, Shelley Watson, onto the board of DNO International. 

Watson was nominated to the DNO board at the AGM in June alongside another RAK Petroleum Director, Zalmay Khalilzad. Given that the latter (he did not take up the position due to heavy workload) is a former US ambassador to the UN and Iraq, I think it fair to conclude that RAK Petroleum has a good angle on what is going on in Iraq and Kurdistan.

I top sliced a few DNO recently on the move up.


If you like this article than why not add a twitter feed from 'EarningsView' by clicking on the 'birdie' link on the left border of this blog. Alternatively, add us on facebook at 'Earnings View', whereby articles will be automatically linked.



Source:

Earnings View 'Oil Stocks Exposed to Kurdistan'

Reuters article 'DNO says no exports until Iraqi deal clarified'

Cal Maine Foods: Update on US Egg Production Numbers

In a previous article I discussed the business model of Cal Maine foods and argued that the key metric to follow was industry production. There is no need to go over the analysis again on this post but, for the benefit of those who want to see it, it is linked here

Essentially, the argument is that high feed costs cause production reductions amongst the weaker players as margins get squeezed. This causes hikes in prices, which are sustainable because egg demand is price inelastic. Cal Maine is an interesting stock because-as a large player- it is seen as a beneficiary of this process.


A brief look at the current production data from the United States Department of Agriculture USDA would suggest that it is still too early to be piling into Cal Maine Foods. Total Egg Production is actually up  1% on last year to December

 

(m)	Dec	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
Prod	7828	7688	6909	7813	7548	7685	7455	7691	7739	7488	7676	7550	7899

 Source: USDA

In addition, if we look at a forwards indicator such as the 2010 percentage of Egg-type chicks hatched vs. 2009 we can't see a strong downturn just yet

 

%	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
2010/2009	103	109	108	111	106	102	105	98	99	110	113	96

 Source: USDA

So for now, I think it is still prudent to stay out of Cal Maine Foods, although, I suspect its time will come!


If you like this article than why not add a twitter feed from 'EarningsView' by clicking on the 'birdie' link on the left border of this blog.  Alternatively, add us on facebook at 'Earnings View', whereby articles will be automatically linked.


Source:

'Cal Maine Foods Playing Its Very Own Cyclical Game'

USDA, National Agriculture Statistics Service 'Chickens and Eggs'

NCC Group a Fast Growing IT Security Stock

NCC Group gave interim results last week and they were warmly received by the market. This is a UK based small cap IT company, but before international stock pickers turn away, I suggest taking a closer look. This stock offers a compelling proposition of offering a highly cash generative business model as well as strong secular growth prospects.

Before discussing the results, I want to outline the nature of the company.


A Secular Growth Stock

NCC core business is software escrow. In other words when a company buys some developmental software, it has to carry the risk that the developer could go bust or disappear. Holding the software code in escrow will help to mitigate this risk, because the company can always retrieve it. The defensive nature of this business was put to the test in 2008-10 and it passed with flying colors. NCC was not able to implement the Co's annual price increases, but with this result NCC confirmed that the price hikes are now back.

The second main division is Assurance, and this focuses on the high growth are of information security. NCC have been acquisitive in this area and has built revenues steadily over the years. NCC offers a range of services and cross sells them across the constituent parts. NGS secure sells security testing services. Site Confidence sells web performance and load testing services. SDLC is a UK based testing services provider.
Finally, US based iSEC Partners sells security testing mainly to the US.

The iSEC acquisition is expands NCC presence in the US, where NCC are seeking to also expand software escrow revenues.


NCC Interim Results

I liked these results. Some bullet points

• Closure of the under performing general IT consulting unit
• Group orders and renewals at £41m vs. £30.9m last year
• UK Escrow annual price increases re-implemented with 5% hike
• Assurance growing strongly due to acquisitions, but underlying profits still rising at 6%
• Margins reducing because Assurance (lower margin than Escrow) is becoming a larger share of sales
• High cash flow generation and the current ratio is falling

I think the closure of the general IT consulting unit has been due for some time. NCC reported that

 

The Group's withdrawal from the general IT Consultancy market resulted in a one off exceptional charge of £950,000, of which £450,000 is non cash related.  Total post tax losses from discontinued operations were £1.1m in the period compared to a profit of £182,000 in 2009

This means that the reported results contain losses of £1.1m from attributable profit which makes 3.1p of diluted EPS. The adjusted diluted cash EPS actually rose 24.6% from 12.2p to 15.2 with the trailing EPS at 32.4p giving a PE ratio of 640/32.4=19.7 times.

The disposal is good news because NCC can now focus on growth.

NCC Set for Growth

I've broken down half year historical numbers for Escrow and Assurance here. NCC year end is in May, all data in millions.

	Nov 2007	May 2008	Nov 2008	May 2009	Nov 2009	May 2010	Nov 2010
UK Escrow	7.8	7.9	7.9	8.7	8.5	9.4	9.2
Eur Escrow	.1	1	1.2	1.2	1.4	1.5	1.5
US Escrow	.5	.7	.8	1.2	1	1.2	1.1
Total Escrow	8.4	9.6	9.9	11.1	10.8	12.2	11.9
Assurance	5.8	7	7.7	18.1	11.3	19.5	21.1

Clearly, the acquisition led growth in Assurance is shifting revenues towards a lower margin division. Furthermore, it is interesting to note that non-UK escrow revenues have gone from 7.1% to 21.8% in the last two years. This is partly due to the inability during the recession to implement price rises and from the international expansion plan. Nevertheless, growth has been excellent and few IT companies can boast anything similar over the last few years.

Turning to segment profitability

  

	Nov 2007	May 2008	Nov 2008	May 2009	Nov 2009	May 2010	Nov 2010
Escrow Profit	4.6	5.6	5.5	6.2	6	7.3	6.7
Margin %	55	58.3	56	55.4	55.4	60.1	56.1
Assur Profit	.8	.9	1	2.6	1.3	2.7	2.4
Margin %	14	13	13	14.1	11.8	13.8	11.5
Total Margin %	38	39.1	36.9	29.8	31.6	32.2	27.6

The reduction in margin can be seen in, however, profits are growing strongly. Moreover, this has always been a highly cash generative business. Trailing free cash flow is 12.1m which puts it on a FCF Yield of 5.6% with strong growth due in the second half. Historically, the second half is stronger and NCC expects the same thing this year. 

Consensus forecasts are for £70.4m in revenues, EPS of 36.6p and pre tax profits of £17.2m with a market cap of £214.5m.  I think this stock is better priced at aroud 710-725p.

If you like this article than why not add a twitter feed from 'EarningsView' by clicking on the 'birdie' link on the left border of this blog.

Alternatively, add us on facebook at 'Earnings View', whereby articles will be automatically linked.