Suffolk-based LPA Group Plc (LPA.L) specialises in the design and assembly of LED based lighting and electronic systems and is one of the leading electromechanical systems manufacturers across the globe. The Company has a strong reputation for innovation winning several awards including the Rail Business Award for Environmental Innovation for its LED based LumiPanel® lighting product. LPA employs around 200 people at four locations in the UK and exports to nearly fifty countries.
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On January 23rd 2018, LPA announced record results for the year ended 30 Sept 2017 and a strong start to the new financial year. Sales rose by 4.9% to £22.48m, generating a 26.3% hike in PBT to £1.91m. Basic EPS rose by 17.1% to 14.40p, gearing fell to 25.7% (2016: 29.2%) while the order book rose by 20% to £21.6m. The final dividend increased 10% to 1.65p, totaling 2.70p for the year (2016: 2.50p). CEO Peter Pollock said the 2016 financial year “marked a step change in the performance of the Group, and these record results for the 2017 financial year are confirmation that we are now established at this substantially increased level of activity. “ He added; “We look forward to continuing progress this year and for the future.”
The record numbers revealed in the FY results triggered alerts across VectorVest metrics as far back as November 2017. Today, the VST (VST-Vector) indicator, (the master indicator for ranking every stock in the VectorVest database), rates LPA at 1.26, which is very good on a scale of 0.00 to 2.00. Added to this, the GRT (forecasted Earnings Growth Rate) for LPA logs at 16.00%, which again is considered a very good rating on the VectorVest stock analysis and portfolio management system. GRT reflects a company’s one to three year forecasted earnings growth rate in percent per year. VectorVest logs a current value of 219p per share for LPA, so at the current 171p the stock can be considered as undervalued.
The chart of LPA.L is shown above in my usual format. Earnings per share (EPS is growing strongly and the share is on a BUY recommendation on VectorVest. Technicians will have noted the cup and handle formation. This is a highly reliable bullish pattern which gave a buying signal above a price of 165p.
Summary: The never-ending VectorVest quest to identify ‘under the radar’ quality growth companies may just have come up trumps again with LPA. Trifast (TRI.L) was identified as a highly cash generative, albeit relatively anonymous growth play as far back as mid 2016. LPA exhibits many of the same qualities, in terms of earnings and dividend growth, but somewhat surprisingly the current market cap is less than the turnover for the last financial year. This relatively anonymous lighting and electrical group sells to an enviable blue chip client list, has won many prestigious awards and might just be one of the big stock market successes in 2018. Buy.
Dr David Paul
January 24 2018
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