There can’t be many FTSE 100 stocks that were badly hit by the US Nasdaq slump. But I reckon Intertek Group (LSE: ITRK) has to be one of them.
Earnings had been growing steadily, and only took a small pause during the pandemic. But then growth stocks went out of fashion.
We’re looking at a 15% share price fall in the past five years, which has knocked the Intertek valuation back quite some way.
Good year
Still, a trading update posted on 23 November looks like cause for cheer. At the time of writing, the Intertek share price is up 3% on the day.
The company does inspection, product testing, and certification. And it sounds like it’s had a good year in 2023.
At constant currency, total revenue is up 7.3% year to date, with like-for-like revenue up 6.3%.
The board reckons the firm is on track to hit its 2023 goals. And it affirmed full-year guidance for mid-single digit like-for-like revenue growth. We should also see margin improvement, and “strong free cash flow“.
Balance sheet
Net debt at the end of the year should be between £630m and £680m.
Now, I don’t like to see debt. It’s been a killer of many a growth stock investor’s hopes.
But for a company with a market cap of £6.3bn and annual revenue of more than £3bn, this seems like small change.
On the cash and liquidity front, Intertek gets a big thumbs-up from me.
Valuation
I might not place Intertek among the best value FTSE 100 stocks right now.
But then, we wouldn’t really expect a stock with this kind of earnings growth record down among the banks, would we?
In fact, with broker forecasts showing solid earnings growth to come, I think we could have a chance to buy a long-term growth stock at a very fair price here.
What was it ace investor Warren Buffett said? “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price“.
Forecasts
Forecasts suggest a price-to-earnings ratio of 20 for the full year, dropping to 16 by 2025.
That would be very close to the FTSE 100 average, and might just be a steal for a growth stock — especially with dividend yields of around 3% thrown in as a bonus.
I do think any market weakness could hit the demand for Intertek’s services, though. It did get away lightly, I think, in 2020. But I’d say the last few years of economic hardship could mean bigger risk now.
Price falls?
Sometimes, all it can take is seeing a growth stock slightly miss its targets, and that can send shareholders rushing for their ‘Panic sell’ buttons.
And that could mean the pain of a share price fall.
Oh, did I say pain? Sorry, no, I meant an even better buying opportunity.
I have higher priorities for my modest amounts of investment cash right now. But if Intertek shares stay low, I might just snag a few for a bit of diversification in 2024.
