A note of caution

Specialist filtration and environmental technology firm Porvair (LSE: PRV) announced strong half-year results this morning. Revenue was up 13% to £52.1m, and up 10% at constant currency, in line with guidance given in a pre-close update on 2 June. Pre-tax profit increased 7% to £4.5m and earnings per share (EPS) rose 9%.

This FTSE SmallCap company reported “good” demand in most of its markets and “healthy” order books for the second half, as well as “a promising project pipeline and many opportunities ahead”. However, management struck one note of caution, saying that the positive outlook was “provided recent economic and political uncertainty does not affect general industrial activity”.

Porvair has strong niche businesses, a robust balance sheet and is punching high single-digit EPS growth. However, with the cautionary statement, and a relatively high forward price-to-earnings (P/E) ratio of 20.9 and low dividend yield of 1.1%, I rate the shares a ‘hold’ rather than a ‘buy’.

A leading player

Chip designer ARM Holdings (LSE: ARM) is even more highly rated than Porvair, trading on a forward P/E of 30.2 with a yield of 1.0%. However, while Porvair is a small company operating in niche markets, ARM is a world-class FTSE 100 giant.

ARM’s tremendous growth has been driven by the smartphone revolution, and while some analysts are concerned by the potential impact on the company of slowing sales of Apple‘s iPhone, ARM’s management sees revenue continuing to grow from rising sales of entry-level and mid-range devices.

Furthermore, ARM is positioned to be a leading player in the next technological revolution — the so-called Internet of Things. In addition, it has geared-up to challenge Intel for server customers, aiming to snatch a quarter of the market by 2020.

Because of the size of the growth opportunities ahead, and because ARM expects Brexit to have little impact on the company, I rate the shares a ‘buy’.

Diversification & stability

Brexit appears more problematic for Spain-headquartered Banco Santander (LSE: BNC) with its significant operations in both the EU and the UK. Nevertheless, its shares held up relatively well in the market turmoil on Friday, ending the day down 15% compared with UK-focused banks RBS and Lloyds, which fell 18% and 21% respectively.

Santander boss Ana Botín posted a brief statement following the referendum result, saying, “our commitment to British businesses, customers and our people remains as strong as ever”, and adding that the group’s geographical diversification (which also extends to the Americas) and focus on retail banking “provides us with diversification and stability and is a source of great strength”.

Many investors are fleeing financials right now, but in my view, Santander is worth holding — to see what the company has to say in its half-year results, which are due in just a few weeks’ time.

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G A Chester has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Apple. The Motley Fool UK owns shares of Porvair and has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool UK has recommended ARM Holdings and Intel. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.