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Forget Brexit! Why I’d buy shares in this cash-rich small-cap company

The market likes today’s half-year figures from CPL Resources (LSE: CPS) and the shares are up around 5% as I write.

Although the firm sounds like a racy mining company, it’s a human resources and recruitment enterprise with international operations, and  I’ve been keen on it for some time.

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Cash-rich with an impressive record

Top attractions for me include the cash-rich balance sheet and an impressive more-than-five-year record of generally rising revenue, earnings, cash flow and shareholder dividends. You can’t detect any volatility in the financial record because of the Brexit process, which I reckon speaks volumes about the firm’s wide reach abroad.

It’s a big set-up with around 47 offices worldwide and some 13,000 employees, covering many sectors of the market such as technology, finance, legal, healthcare, pharmaceutical, life sciences, sales, engineering, light industrial and office administration. Clients range across the spectrum from small businesses to multinationals.

The interim results cover the period to 31 December and revenue rose 5% compared to the equivalent period the year before. But that rise in revenue has worked wonders for earnings, which shot up by 23%. The directors expressed their satisfaction and optimism regarding the outlook by pushing up the interim dividend by 25%.

On top of that, the net cash position I’ve admired for a few years increased by almost 56% to €47m. I reckon this cyclical firm is doing exactly what I would want it to do and making hay while the sun shines. A big cash position could help see the company through any general economic downturn in the future.

A positive outlook

Chairman John Hennessy said in the report that the directors are “conscious” of the effects political, regulatory and economic events globally can have on the business, but they expect profit before tax for the full year to be “ahead of current market expectations.” Statements like that are music to the ears of investors, and this one could be why the share price is buoyant today.

The company said that growth in the period came from organic sources and both the firm’s divisions delivered a 10% increase in net fee income. The Permanent division experienced “favourable” economic conditions in its key markets with particular strength in the Technology and UK Healthcare sectors. Meanwhile, the Flexible Talent division rode a wave of global demand for more flexible workforce solutions.  

There’s always the risk that the party could end with cyclical businesses, but there’s no sign of deteriorating conditions ahead right now. CPL Resources is trading so well and has such a good financial record, that I reckon the shares are attractive. At a price of 700p, the forward-looking earnings multiple is around 10 for the trading year to June 2021, and City analysts anticipate a dividend yield of just below 2.3%. I reckon the market has assigned the company a full-looking valuation for now, but I’d be tempted to buy some of the shares if they weaken from here.

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Kevin Godbold has no position in any share 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.