Should I Invest In Abcam Plc, Judges Scientific PLC and Carclo PLC Now?

stock exchangeWhen I last wrote about Abcam (LSE: ABC), the supplier of life science research tools, back in July, the shares stood at 380p. That was hard on the heels of an ‘exceeding expectations’ market update.

Since then the price has been as high as about 430p, but now sits at around 388p, which makes the shares look interesting again.

Still growing

Last month’s full-year report confirmed that growth is still on track, with constant-currency sales up 8.6%. The firm is investing to expand as evidenced by the opening of its new Shanghai office during the period. Yet profits held firm, and the firm seems set to grow from here.

Abcam produces and distributes protein research tools that enable life scientists to analyse components of living cells at the molecular level, which is an essential part of understanding health and disease. The firm’s vision is to create the world’s leading life science reagents company.

Essentially, the firm is a ‘picks and shovels’ provider to the life science industry and, as such, provides investors with an investment vehicle for the sector without facing the sharp end of  the risks involved in developing treatments from scratch.

At a share price of 388p, Abcam trades on a forward P/E rating of about 21 for 2015 and the shares yield a dividend of around 2.5%. Analysts following the firm expect earnings to grow about 2% that year, but the directors think a recovery in levels of centrally funded research could help drive sales beyond 2015.

Challenging trading conditions

With last month’s half-year report, Judges Scientific (LSE: JDG), the scientific instrument specialist, confirmed that difficult trading conditions in the instrumentation sector led to modest organic growth in the period. The effect of acquisitions flatters the firm’s interim results, and the directors expect the full-year results to show a 20% decline in earnings per share.

The news of a reversal in earnings growth decimated the share price this year, and it still seems to be falling. At today’s 1272p, the shares are down a further 13% since July, when I last wrote about the firm. Now, we can buy into the Judges Scientific story for a forward P/E multiple of around 14 for 2015, and there’s a 2% dividend yield. Given that City analysts expect earnings to grow 12% that year, the price seems fair.

When growth seemed robust, the P/E rating raced ahead. The current valuation seems like an opportunity to secure a decent entry point for those missing the excitement last year.  After all, as the chairman says, the firm’s ability to pursue its strategic objectives remains undiminished.

The valuation looks fair to me; if it dips lower, the investment opportunity could start to look compelling.

Has the share-price correction overshot?

Carclo (LSE: CAR) shares spent the last two years dropping. They started 2013 at 500p but trade around 90p today. At this price, the technical plastics supplier sits on a forward P/E rating of just over 10 for year to March 2016, with a dividend yield of 3.4%. That valuation appears to sit well against predictions of a 30% uplift in earnings that year.

The fly in the ointment is the firm’s CIT Technology (“CIT”) business, which is underperforming. The directors are reviewing those operations and it looks like write-downs are on the way. However, in the company’s Technical Plastics division, interim profits look set to come in well ahead of last year’s comparative period.  Likewise, in the LED Technologies division, profits look set to come in well up this half-year. Even the Precision Engineering division trades in line with last year’s comparative period, and the directors think recently secured new business should lead to growth into that division next financial year.

Investors had high hopes for fast growth in the CIT division and the outcome is disappointing. Carclo is paying for such poor performance by means of valuation compression. The bulk of Carclo’s business activities seem in rude health, though, so there’ll come a point when the shares will seem to offer value that’s hard to ignore. That said, the firm’s activities are cyclical and there’s quite a bit of debt on the books at around two-and-a-half times the level of last year’s operating profit. We’ll find out more when the interim report arrives on 18 November.

What next?

Abcam, Judges Scientific and Carclo all seem worthy of further research right now; as does a company the Motley Fool team labelled The Motley Fool's Top Growth Share. You can download the free report, without obligation, by clicking here.

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Kevin Godbold has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.