Can strong operational momentum keep the Informa share price rising?

FTSE 100 company Informa has been performing well, but this may be just the beginning of a multi-year trend for the share price.

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The FTSE 100’s Informa (LSE: INF) issued a positive AGM trading update this morning (21 June), and the uptrend in the share price is continuing.

At just above 865p, the stock’s trading near its 52-week high. For some investors — including me — there’s nothing more appealing than a stock trending higher. So the 52-week-high screen can be a great source of potential long-term winning investments.

Ignoring valuations for a moment, studies have shown that trending stocks tend to keep moving in the established direction – whether up or down. To me, that knowledge is an edge in the markets that I’m keen to play.

Operations performing well

The good news is that Informa has some solid business fundamentals backing up its rising share price. The firm makes its living as a business-to-business (B2B) events, digital services, and academic markets supplier with international operations.

In today’s update, the company declared continuing momentum and “strong” growth in the business. Chief executive Stephen A Carter said the company has “changed gears” and is now delivering more than 10% annual growth in revenues. On top of that, profit margins, earnings and cash flows are all “increasing”.

The improvement’s arisen because of the company’s strategy of focusing on specialist markets, unique content and internationalisation, Carter said.

Things are going so well that the business is on course to deliver full-year earnings at the “upper end” of previous guidance.

Meanwhile, City analysts have pencilled in an advance of more than 21% for earnings in 2024 and just above 14% for 2025. There’s also likely to be double-digit percentage increases in the shareholder dividend each year too.

Beware of volatility and cycles

Figures like that reflect strong growth, but we should be wary. One of the biggest risks here is the fierce cyclicality in the business and the sector. Earnings were down in 2018, they collapsed in 2020 when the pandemic struck, then dropped again in 2021 and 2022.

However, the share price is up by just over 100% from its 2020 pandemic low and moving to new highs now. I see that as positive when backed by estimates for strong earnings growth in the business.

In general, I’m optimistic about the prospects for the ongoing growth of economies and businesses. We may be in the early stages of an enduring period of prosperity. So I see Informa as a potentially decent long-term investment from where it is now.

But what about valuation? Well, we’re not in bargain-basement territory. With the share price near 857p, the forward-looking earnings multiple for 2025 is about 15. Meanwhile, the anticipated dividend yield is just under 2.7%.

Not cheap, but not overly expensive, given the growth on offer when compared to the FTSE 100’s rating of just under 14 and its yield of about 3.4%.

On balance, I don’t see the valuation as being outrageously high and would be keen to dive in with further research now. My aim would be to add a few of the shares to a diversified long-term portfolio.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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