I’m so used to share prices falling on the day a company announces its results that it is refreshing to see Judges Scientific (LSE: JDG) go up today on the release of its interims.
I think we can find the reason for the move in Chairman Alex Hambro’s statement regarding the outlook. Today’s figures sparkle, and he told us that the strong operational momentum continued into the second half of the year. He and the other directors expect earnings per share for the full year to be “ahead of current market expectations.”Ah! Those magical words so beloved of private investors and investing institutions across the length and breadth of the land.
It’s been a year since I last wrote about the firm and progress since then has been stonking. I said back then that the business had “staged quite a comeback from the doldrums it found itself in 12 months ago.” Indeed, over a 12-month period, the stock had surged around 53% higher based on a strong recovery in earnings. I’m happy to report today that the firm has repeated the trick with the shares moving another 37% higher over the past year on the back of earnings that are exploding higher.
The strategy of acquiring and developing scientific instrument businesses is paying off. In the first half of the year, revenue moved 13% higher, cash from operations shot up 43% and adjusted earnings per share rocketed 52% higher. Once again, the firm’s growth is well balanced with cash inflow supporting advances in earnings. And it’s not all down to the firm’s acquisition activity either. The organic order book moved 2.3% higher and organic revenue made up 5.7% of the overall revenue advance.
It seems clear that Judges Scientific is doing many things right, and it finds its reward in a cash balance that is 35% higher than it was six months ago, at £14.4m, and in a net debt figure that has plunged 68% since Christmas down to just £2.4m. The firm admits that an “underlying favourable foreign exchange environment” boosted profits, but the balance sheet is sound and I reckon that bodes well for the future.
A positive outlook
Looking forward, Alex Hambro said in today’s report that demand in the short term will likely be affected by currency fluctuations and “the ups and downs of government spending in various parts of the global market.” However, he asserts that there is a long-term positive trend driving the scientific sector. To me, that outlook statement suggests a potential opportunity for investors. If you are focused on a long-term investing horizon, I reckon Judges Scientific has proved its mettle and any short-term weakness in the share price because of a slip in earnings can be viewed as an opportunity to buy some shares at a better price. You only have to look back as far as 2016 to see how well such a strategy would have worked out recently. I think the firm is 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 recommended Judges Scientific. 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.