The Motley Fool

Is Accsys Technologies PLC A Better Buy Than Smiths Group plc And RPC Group plc?

Shares in chemical technology company Accsys Technologies (LSE: AXS) suffered a sharp drop in early trade today despite the company releasing a set of full-year results that showed an improvement versus last year. In fact, Accsys has been able to narrow its pre-tax loss to £5.6m from £5.9m in the previous year, with an increasing top line being neutralised to an extent by the £2.1m costs related to arbitration with Diamond Wood China.

And, while the effects of this dispute have undoubtedly held back the company’s share price, Accsys remains confident of its long-term future in Asia, which it believes offers substantial opportunities for its Accoya wood product. Furthermore, Accsys believes that it will become cash-flow positive in the current year and is also pursuing options regarding an increase in its manufacturing facilities so as to meet increasing demand for its products.

Looking Ahead

Clearly, it is somewhat disappointing that, while Accsys has seen its loss narrow, it remains a loss-making company. However, looking ahead, this is set to change. For example, Accsys is forecast to post a pretax profit of around £0.7m in the current year, followed by a pretax profit of £1.2m next year. This puts it on a price to earnings growth (PEG) ratio of just 0.6, which indicates that its shares offer growth at a reasonable price – so long as it can meet its optimistic growth targets.

Clearly, guidance will inevitably change between now and the end of next year, but Accsys seems to be moving in the right direction and could continue to post gains after its share price has risen by 14% since the turn of the year.

Sector Peers

While Accsys does have clear long-term potential to me, it remains a relatively high-risk play due to its size, scale and the fact that it is a loss-making business. However, there are other appealing opportunities within the industrials space, with the likes of Smiths Group (LSE: SMIN) and RPC (LSE: RPC) offering good value for money.

For example, Smiths Group and RPC both trade on a price to earnings (P/E) ratios of just 14, which indicates good value for money while the FTSE 100 has a P/E ratio of around 16. And, with the two companies yielding 3.6% and 2.7% respectively, they offer an appealing level of income compared to the lack of dividends at Accsys. Furthermore, while Smiths Group may be expected to post flat earnings over the next two years, RPC’s double-digit growth forecasts indicate that the stock could be a strong performer.

As such, all three stocks appear to have their merits. While Accsys has the potential to see investor sentiment rise as it transitions from a loss-making entity to a profitable one, it could be prudent to pair it up with a good value, income-producing stock such as Smiths Group. And, for investors seeking a halfway house, RPC appears to be the logical choice due to its above average growth rate, decent yield and low valuation. As such, all three stocks appear to be worth buying, with a mix of the three seeming to be the best way forward for Foolish investors.

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