As Regenersis PLC Continues To Decline, Should You Buy In?

stock exchangeRegenersis (LSE: RGS) is falling once again today, down around 11% at time of writing, as investors continue to turn their back on the company.

Today’s declines take Regenersis’ total fall this week to around 33%, wiping nearly £100m off the company’s market capitalisation. Of course, these declines can be traced to Tuesday’s worse than expected full-year results, in which the company revealed that fiscal 2014 profit had fallen sharply, despite higher revenues. 

Pre-tax profit fell to £2.9m, from £5.7m as reported last year. Net income fell to £3.0m, from £4.7m as reported last year. Earnings per share halved from 10.5p to 5.4p. 

However, these results were impacted by one-off restructuring and acquisition costs. The company also undertook a placing during the year, which impacted earnings per share figures. The placing raised £100m for the acquisition of Blancco Oy Limited.

Adjusting for exceptional items and the placing, Regenersis’ earnings per share would have come in at 18.2p for the period, up 8.3% year on year. In constant currency, the group’s revenue expanded by 18%. 

Alongside results, management announced a dividend increase of 60%. 

A good time to buy

Looking at yesterday’s results, I can’t help but think that the market has overacted to Regenersis’ lower level of profitability.

That being said, looking at Regenersis’ historic valuation, it’s easy to see why investors have rushed to dump the company’s shares. Indeed, before Tuesday’s results the company was trading at a historic P/E ratio of around 19.3, which did not leave much room for error. 

Nevertheless, after dropping by more than a third, Regenersis’ shares now appear to be attractively priced. For example, the company currently trades at a forward P/E of 12.3 and despite headwinds from unfavourable currency movements, management remains confident that the company can continue to hit growth targets. 

Management upbeat

It’s obvious that Regenersis is chasing growth. Alongside Tuesday’s results, Matthew Peacock, Executive Chairman of Regenersis released a statement saying that:

 “Overall the year just ended was transformative in terms of the shape of the Group and its prospects for the future. The Group has become an exciting Advanced Solutions-led business growing via organic progress and M&A…I am looking forward to further expanding a number of strong performing divisions (organically and via bolt-on M&A) which are demonstrating a proven track record of growth.”

So, it would appear as if shareholders have got plenty to look forward to as the company bolts-on growth. Moreover, Regenersis has plenty of financial headroom to pursue this strategy. The company has a net cash position of around £20m with almost no borrowing.

A good bet 

All in all then, after recent declines Regenersis now looks attractive on a valuation basis as the company continues to seek growth opportunities. 

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Rupert does not own shares in any company mentioned.