Altrincham-based Styles & Wood Group (STY.L) and its subsidiaries offer a full range of professional and contracting services to banking and finance, retail and leisure, commercial and public sector organizations. The services are provided through a number of divisions, including portfolio & property support, project management,
technology and building intelligence, design, programme services and renewable energies.
Full year results in April 2016 revealed a 55% boost in underlying profits, a 19% hike in revenues to £115m and a bulging order book. The company said that a shortage of new office space and the drive for operational efficiency continued to create demand for refurbishment and fit-out work. Added to this, Styles & Wood said it sees accelerating demand for high quality commercial space over the next five years.
An opportunity to invest into the Styles & Wood growth story was picked up at the start of the year by UK stock screening company VectorVest, which uses a range of metrics to identify opportunities early in the growth cycle. In particular, the VectorVest value ratio (a measure of a stock’s current worth) attributes a current Value of 698.00p per share vs. the current price of 445p per share. Value is computed from forecast earnings per share, forecasted earnings growth, profitability, interest, and inflation rates. Certainly the raft of contracts won since the April results underscore this view.
Another VectorVest metric is GRT (Earnings Growth Rate). GRT reflects a company’s one to three year forecasted earnings growth rate in percent per year. Styles & Wood has a forecasted Earnings Growth Rate of 28.00%, which VectorVest considers to be excellent.
The chart of Styles and Wood is shown for the past 6 months. The green line above the price shows the VectorVest valuation while the blue line in the window below the price shows the rising Earnings per share (EPS).
Since the Brexit low the share has made two rising bottoms and recently broken above the 52 week high. Technical Analysts refer to the reversal pattern over the last 6 months as a cup and handle. This pattern was made famous by William James O’Neil in his ground breaking book “How to make money in stocks”. The cup and handle is a bullish signal and the share looks highly probable to advance further from here.
In summary, Styles & Wood is undervalued at 445p, compared to the VectorVest valuation of 698p per share. With a strong forecasted growth rate, and in the run up to interim results in a few weeks, we rate Styles & Wood as a Buy.
14th September 2016
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