Swallowfield (SWL.L) is a UK-based company, which is engaged in the development, formulation and supply of personal care and beauty products across other European Union countries and rest of the world. The Company offers its products in various product types, such as personal care aerosols, hot pour, premium liquids/tubes/roll-ons, fragrance and gifting, and color cosmetics and pencils. The Company’s manufacturing, filling and aerosol packaging capabilities include traditional system in tin-plate or aluminium cans. Swallowfield offers its products in various brands, and offers a range of services, such as project management, sourcing, manufacturing and logistics.
On November 10th 2016, Swallowfield published an AGM statement, and said that trading in the first four months of the year had been in line with expectations. The group said it expects that significant new product launches for major brand owners will contribute strongly to group performance, particularly in the first half of the fiscal year. Further contract wins were achieved in the UK and Europe, which will start to contribute from the beginning of the next financial year. Management anticipates that profitability in the first half will also see a small benefit from Sterling weakness. Long-term the group expects to maintain the positive momentum and are confident in the prospects for the year. Aside from the strong trading update, SWL’s Real Shaving Company brand “sensitive shave gel” won best new product at the prestigious GQ grooming awards. Interim results are due late February, early March 2017.
The potential upside in SWL had been flagged up across several key metrics across the VectorVest stock analysis and portfolio management system when the stock fell in value during October 2016. Despite the recovery since then, in the view of VectorVest the value in the company still has yet to be recognised. The VST-Vector (VST) is the master indicator for ranking every stock in the VectorVest database, and is computed from the square root of a weighted sum of the squares of Relative Value, Relative Safety, and Relative Timing. SWL has a VST rating of 1.30, which is very good on a scale of 0.00 to 2.00. In terms of valuation, VectorVest currently values SWL at 439.07p per share, vs. the current price of 292.50p per share.
The chart of Swallowfield is shown above with the VectorVest valuation shown as the green line study above the price. Below the price window earnings per share (EPS) is charted and is growing strongly. Since the high in October 2016 the share has charted a “rounded bottom” or cup formation. This is a bullish pattern and when confirmed by a break of the 52 week high should see the share moving much higher. The technical target from the “measured move” and the VectorVest valuation are both around 450 which represents a potential (and highly probable) 50% move from yesterdays close.
The combination of a strong trading update, prestigious product awards and even the growing dividend yield marks out SWL has a special growth opportunity. Even with the shares trading at all time highs, there remains a significant valuation gap, which VectorVest believes will close in the run up to the upcoming interim results.
At present the trends on VectorVest are Down/Up. This means the short term trend is down while the longer term is positive. Our advice is to wait until the short term trend changes to Up before any action is taken.
Dr David Paul
January 25th 2017
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