The Motley Fool

What might this director sale mean for the Judges Scientific share price?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Scientist filling a needle
Image source: Getty Images.

Investors love little-known growth stories with proven successful strategies. Judges Scientific (LSE: JDG) applies a disciplined set of criteria in scooping up scientific instrument makers. That is a profitable niche. The Judges Scientific share price has soared in the past few years.

Recently the founder sold over three million pounds of his holding in Judges. What might this mean for the stock?

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

The Judges Scientific share price was already high

I think Judges is an excellent run business. It has identified an area with customers who have steady demand for expensive products. In scientific research, exactitude matters a lot – so customers are willing to pay a premium price for a high quality product. Through its discipline in buying companies at a low multiple of earnings, Judges has been able to build a diverse set of value producing assets which is hard to replicate. It matches a lot of what Warren Buffett suggests makes a good business.

The stock market had noticed this, pushing the share price upwards.

For example, the shares almost quadrupled between the start of 2017 and 2020. Over 2020 they moved around a lot. Shutdowns meant university labs and research institutes weren’t in such a rush to buy instruments. Those that were sold couldn’t always be installed quickly. Nonetheless, the robustness of the business model proved itself again and the shares added another £10 or so across the year. The organic order book at the start of 2021 was higher than a year before.

Last month the company guided that its adjusted earnings per share for the year would exceed market expectations. The Judges Scientific share price hit a new high. On 19th January, its founder David Cicurel sold 50,000 shares. That sounds like a lot and indeed it was a multi-million pound transaction. However, it was only 7% of his holding. After the sale, Mr. Cicurel still holds over 650,000 shares in the company he set up.

Valuation concerns

Directors sell shares for all sorts of different reasons. A sale in itself is not necessarily cause to concern.

I continue to find the business model compelling. The company has increased ordinary dividends each year by a double digit amount for over a decade now. I also expect that the pandemic will increase long-term demand for scientific instruments, so think that Judges Scientific’s growth story could actually still be in its opening innings.

However, the strong price rise in recent years has given me pause for thought. At a price-to-earnings ratio of 27, the shares are not cheap. While I like the dividend policy, the dividend yield sits below 1% due to the high share price.

But the well-constructed cash generative business model, quality assets and growing demand means that the share price has continued its ascent. It seems to have shrugged off the director’s sale and I don’t think the market is interpreting as a lack of confidence in the future Judges Scientific share price.

I will be spending time to examine the company and its market opportunity more closely to consider buying the shares. Judges Scientific probably has a magnifier that would be ideal for the task!

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

christopherruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Judges Scientific. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.