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Despite tasty-looking fundamentals, the shares of fluid power products distributor Flowtech Fluidpower (LSE: FLO) continue to mark time in a range around 125p to 150p, and I think that value is building up.

Highlights in today’s half-year report include revenue almost 25% higher than a year ago, underlying operating profit moving up 11% and a decline of just over 40% in the firm’s net debt figure on the balance sheet. The directors pushed up the interim dividend almost 5% in a sign of confidence in the outlook.

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Acquisitive growth

Earnings per share declined by almost 12%, but I don’t think that’s anything to worry about. Last year, a deferred tax credit flattered the earnings result and this year the share count is a little higher because of a £10m capital raising event in March. The company wanted the money to move forward with its acquisition programme and reports five completed during 2017 so far and 11 since first listing on the stock market in 2014.

The directors reckon they are “confident” of completing more acquisition deals in the second half of the year, which is encouraging because the firm has become a consolidator in the fragmented fluid power sector. I reckon such a strategy could lead to a critical mass of business that leads to an irresistible offering for Flowtech’s customers, based on an efficient and lower-cost distribution service.

Organic progress

Acquisitive growth in the UK, Ireland and continental Europe is running alongside good organic progress, and City analysts following the firm expect earnings to advance 36% this year and 12% during 2018. Meanwhile, at today’s 134p share price, the forward price-to-earnings (P/E) ratio for 2018 sits just below nine and the forward dividend yield at almost 4.6%. Those forward earnings should cover the payout around two-and-a-half times. Assuming that Europe’s economies are not about to fall off a cliff, I think these indicators represent good value.

Over at Servelec Group (LSE: SERV), yesterday’s interim results report sent the shares into a bit of a tail spin and at 240p, the price is around 16% lower than it was at the end of last week. The UK-based technology firm provides software, hardware and services to the UK healthcare, local government, nuclear, power, utilities, oil and gas sectors, but as you might have guessed, there’s a problem.

Positive long-term outlook

Chief executive Alan Stubbs tells us in the report that a deferment in customer demand in its technologies division, and in the power and infrastructure segment of its controls division, will likely affect short-term progress. But he assures us that the health and social care division, and the oil and gas segment of the controls division, are performing well and he is positive about the longer-term prospects of the company.

Such short-term challenges in an otherwise decent long-term story can spell opportunity for us investors and the first-half numbers show us the firm’s potential when things are going well. Compared to a year ago, revenue lifted 11%, adjusted diluted earnings per share rose 45%, and the firm’s net debt figure declined by a healthy-looking 54%. The directors indicated their ongoing confidence in the bigger-picture outlook by pushing up the dividend by 21%. I think Servelec is interesting right now and one to keep a close eye on.

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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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