Thursday, June 14, 2018

Excellent Results Supporting A Steep Valuation At Halma

I really like the businesses at Halma (OTCPK:HLMAF) (HLMA.L), but when I last wrote on the company in January, I thought there wasn't much room for the already-steep multiples (on both an absolute and relative) to expand much further. For a little while that call worked, with the shares losing about 10% of their value between late January and late March, but a positive late March update and renewed enthusiasm for companies exposed to the oil/gas recovery and commercial buildings sparked a big rally that has left the shares about 10% higher than they were back in late January.

I am still a big fan of Halma's business mix and management's strategy to augment its core strengths with selective M&A and greater internal investments in digital capabilities (including IoT and analytics). It's also very easy to like a company that is logging double-digit organic revenue growth and even stronger order growth. The "but" remains valuation; the shares are trading at multiples more than 50% above the company's long-term averages and close to 33% above a peer group of quality growth companies. Given the level of expectations built into the price, I'd rather err on the side of missing more of the run than risk jumping in ahead of even a partial reversion to the mean.

Continue here:
Excellent Results Supporting A Steep Valuation At Halma

No comments: