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Clipper Logistics (CLG) shares just popped 22%! Here’s what I’d do now

Last Friday, I listed two exciting growth stocks that I’d buy ahead of Bitcoin. One of these stocks was Clipper Logistics (LSE: CLG) – an innovative logistics company that counts ASOS, Sports Direct, Pretty Little Thing, and John Lewis among its customers.

Today, just five days after my article, its shares have soared 22%, meaning that you could have made a 20%+ return in less than a week. Not bad at all. I’ll point out that Bitcoin has fallen around 6% in this time.

So, why have Clipper shares popped today? And what’s the best move now?

Takeover speculation

The reason that CLG shares have surged today is that the company has released an announcement confirming that it has received a preliminary approach from private equity firm Sun European Partners in relation to a potential acquisition.

This comes after Sky News reported yesterday that Clipper founder and Executive Chairman Steve Parkin, who owns almost a third of the company’s shares, had approached fellow board members about a potential takeover. According to Sky, sources said that Parkin had become frustrated with both the amount of corporate governance-related commitments associated with running a public company and the recent slide in Clipper’s share price (the shares have had a terrible run over the last 18 months due to Brexit uncertainty).

I’ll point out that this morning’s announcement from Clipper states that “there can be no certainty that an offer will be made for the company, nor as to the terms on which any offer will be made.” It does say, however, that the company is now considered to be in an “offer period” and that it has appointed Numis Securities as its financial adviser.

What I’d do now

So, what’s the best move now?

Well, looking at the company’s current market capitalisation and valuation, I personally think that a takeover offer needs to be at a higher price than the current share price.

Even after the 22% rise in the share price today, Clipper’s market cap is still only around £300m. Given that the company’s market cap was £430m at the start of 2018, and that the group generated revenue of £460m last year, I think that an offer needs to be at a higher level.

I also think the company looks undervalued. Right now, analysts forecast earnings of 19.8p per share for the year ending 30 April 2020. At the current share price, that puts the stock on a forward-looking P/E of just 14.8. When you consider that Clipper has grown its top line by nearly 60% in the last three years, that looks too cheap, in my view. 

So, here’s what I’d do. If you already own the shares (as I do), I’d hold on to them for now. And if you don’t yet own the shares, I think they’re still worth buying today. Whether or not we see a takeover offer in the near term, I believe the stock has upside potential.

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Edward Sheldon owns shares in Clipper Logistics and ASOS. The Motley Fool UK owns shares of and has recommended ASOS. The Motley Fool UK has recommended Clipper Logistics. 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.