But we’ve seen earnings per share from the energy supplier falling for several years, from 26.6p in 2013 to just 16.8p by 2016. The dividend has been falling back too, though not at the same rate. From 17p per share in 2013, the annual payout had been cut to 12p three years later, and forecasts would see that dropping to 10.9p by 2019.

The 2013 dividend was covered 1.56 times by earnings, but predicted cover for 2017 will have dropped to just 1.04 times.

Switching is easy

Consumers are switching suppliers rapidly these days, and Centrica lost 823,000 customers between June and November 2017. With belts still being tightened, I can see that run continuing for some time yet.

There’s regulatory pressure too, and Centrica’s set of proposals “to deliver a fairer and sustainable energy deal for customers” set out in November look like a ‘catch-up’ response to competitive and regulatory pressure. Changing its offerings in line with rivals may well slow the flow of departing customers, but regularly changing suppliers is the new reality.

It is still expecting operating cash flow to be above £2bn for 2017, with net debt between £2.5bn and £3bn, but forecasts suggest a bottom-line EPS drop of 26%. And although there’s a 9% earnings rebound pencilled in for 2018, I can see that falling cover putting the dividend under pressure.

Rising divdends

While Centrica’s dividends are falling, those from Fidessa Group (LSE: FDSA) are steadily growing. The software company, whose trading systems are used by the financial industry, revealed a 6% rise in its regular dividend for the year ended December 2017, to 45p per share.

On top of that, there’s a repeat of 2016’s 50p-per-share special dividend, to bring the total to 95p, for a total yield of 3.6% on Friday’s closing price of 2,605p. As I write on Monday, the share price is up 7% to 2,785p.

With the new MiFID II financial market regulations finally coming into force, chief executive Chris Aspinwall said: “It is also clear that increasing numbers of firms are going to need assistance in building out the platforms of the future and Fidessa is already seeing evidence of this within its pipeline.“

He went on to suggest that the business is in a strong position to benefit by “replacing in-house platforms, other weaker vendors and also through specific small consolidation opportunities.“

Growth plus cash

Adjusted pre-tax profit rose by 10% to £54.3m, with adjusted EPS up 11% to 103.9p, and cash stood at £92.4m at year-end. This all makes Fidessa’s cash prospects look good, and Mr Aspinwall also suggest it should mean “a greater ability to invest in further opportunities as the markets develop, or if the right opportunities are not clear, deliver an increase in margin.“

Forecasts put the shares on forward P/E multiples of around 26, which might seem a bit high. But I see long-term growth potential here with the ability to expand both organically and by acquisition, and a prospect for steadily rising long-term dividends. Fidessa could be one to buy and hold for decades.

The post Why I’d buy this top dividend stock instead of Centrica plc today appeared first on The Motley Fool UK.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Fidessa. 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.

Today I’m going to look at two stocks which I believe tick all the right boxes for income investors.

Packing a profit

Today’s trading statement from packaging group DS Smith (LSE: SMDS) reported that the group is on course to meet expectations this year, after “an encouraging start”.

This firm makes packaging for a wide range of purposes, including automotive parts, drinks, chemicals and pharmaceuticals. The shares recently hit an all-time high of 507p, and remain close to this level at the time of writing.

You might expect this to mean that the group is expected to deliver record profit growth this year. Interestingly, that’s not actually the case. On an adjusted basis, the group’s earnings are expected to be broadly unchanged from last year in 2017/18. What is exciting, in my view, are the long-term growth potential of this business and its rising geographic diversity.

DS Smith has a sizeable presence in UK and European markets, and has recently completed a substantial acquisition in the US. This is expected to become a key area of growth for the group.

Although sales and profits may dip during recessions, I believe underlying demand for sophisticated packaging is likely to rise over the next decade. On this basis, DS Smith shares look quite affordable to me. The stock has a forecast P/E of 15 for the current year, with a prospective yield of 3.2%.

This dividend payout has bounced back rapidly since 2009, when it was halved. Last year’s payout of 15.2p per share was almost double the level seen in 2008. This strong growth appeals to me and I think the stock remains worth buying.

Safer than banks?

It’s not been easy to generate reliable dividends from financial companies since 2008. But one business that’s gone from strength to strength is financial software firm Fidessa Group (LSE: FDSA).

The company’s main business is providing software for institutional investors, allowing them to manage functions such as trading, risk management, compliance and analytics. Such systems are complex and highly interconnected. Unsurprisingly, the firm’s customers are reluctant to switch to rival offerings. In its recent half-year results, Fidessa said that 88% of revenue is recurring.

This stickiness helps to give the group considerable pricing power. Fidessa has generated an average operating margin of about 15% since 2011. Return on capital employed, a more meaningful measure of profitability, has averaged 25% over the same period.

Such high levels of profitability mean that Fidessa generates a lot of cash. It has been able to fund its growth without needing any debt. Today, the group has net cash of about £70m and a well-covered forecast dividend yield of 4.2%.

That’s a high yield for a share which has a P/E of about 22. I’d normally shy away from such premium valuations, but the profitability and stickiness of Fidessa’s services suggest to me that this could be a fair price. In my view, this is a stock that could be worth buying on the dips.

The post 2 super dividend stocks you probably haven’t considered appeared first on The Motley Fool UK.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended DS Smith and Fidessa. 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.

Investor appetite for Fidessa (LSE: FDSA) has failed to meaningfully recover after the IT services giant’s chilling trading statement in April.

The company’s share price descent cannot be described as catastrophic. But I expect its value to continue dropping in the weeks and months ahead.

In its spring update Fidessa announced that while it “continues to see structural and regulatory drivers within the market, the increasing number of European elections, the forthcoming Brexit negotiations and the establishment of the new US administration are clearly creating some uncertainty.”

This environment had seen a number of its customers delay decisions during the first quarter, Fidessa advised. And given that the political malaise on both sides of the Atlantic is intensifying, I reckon its next financial update (half-year numbers are scheduled for July 31) could prompt another sharp fall.

Projections in peril?

In this tricky environment the City expects the Woking business to endure a 1% earnings slip in 2017, although clearly this estimate is in danger of being downgraded should market conditions indeed remain difficult. And this scenario puts Fidessa’s perky dividend projections in serious jeopardy, in my opinion.

The trading, investment and information services provider is expected to pay a total dividend of 92.1p per share this year, creating a market-beating yield of 3.9%. However, this projection is barely covered by predicted earnings of 92.8p.

And the situation does not improve much for next year, either. A projected 10% earnings improvement, to 101.6p, also barely covers an anticipated dividend of 95.8p (which creates a 4% yield).

I believe those seeking chunky dividends in the near term and beyond can find much safer picks elsewhere, and certainly ones which carry much better value — Fidessa currently boasts a forward P/E ratio of 25.7 times, sailing above the broadly-considered value watermark of 15 times.

Pumping powerhouse

I am far more optimistic over the investment outlook over at Flowtech Fluidpower (LSE: FLO), particularly after this month’s latest trading update.

The builder of hydraulic, pneumatic and industrial instruments saw revenues detonate 24.7% in January-June, it advised. Flowtech continues to enjoy rampant demand across its businesses, with solid organic growth supplemented by the positive impact of recent acquisitions. And the likelihood of further M&A action should keep revenues on an upward tilt. The firm snapped up OCL, a specialist in the movement and storage of fuels, liquids and gases, earlier in July.

So it comes as little surprise that the Square Mile expects earnings to keep sparking higher.

A 29% bottom-line rise is predicted for 2017, a forecast that is expected to push the dividend from 5.51p per share last year to 5.8p. Not only does this create a handsome 4.3% yield, but also leaves the anticipated reward well covered — indeed, coverage of 2.3 times sails above the safety benchmark of two times.

And the good times are predicted to roll into 2018, an estimated 5% earnings rise is expected to drive the dividend to 6.1p. The yield for next year subsequently stands at 4.5% and dividend cover is retained at 2.3 times.

With Flowtech also dealing on a multiple of 10.3 times forward earnings, I reckon value-hungry investors need to give the Skelmersdale business a close look.

The post One dividend stock I’d buy right now, and one I’d avoid appeared first on The Motley Fool UK.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Fidessa. 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.

The total investment in Galvani over the next seven years could be as much as £540m and the deal represents an important step forward in GlaxoSmithKline’s bioelectronics research. This should help to further diversity its business model, with its appeal for investors seeking out a resilient, robust and relatively consistent healthcare company remaining high at a time when the outlook for the wider index is highly uncertain.

Although GlaxoSmithKline has risen in value by 24% since the turn of the year, it still yields 4.7%. This not only indicates that it remains a top-notch income play, but also shows that further share price gains could lie ahead – especially with sterling being weak and providing a boost to the company’s bottom line.

Profitable but pricey?

Also reporting today was Fidessa (LSE: FDSA), with the information solutions company’s first half sales rising by 4% (constant currency). In fact, Fidessa’s top line grew across all of its business lines and regions and with 63% of its total revenue being derived from outside of Europe, the potential challenges that may come to the fore in the UK and EU may not dampen Fidessa’s operating performance in future.

Fidessa’s revenue is also made up of 86% recurring revenue, which provides it with relatively high consistency and resilience. And with strong cash generation, Fidessa has been able to increase dividends by 9% in the first half of the year. This puts it on a yield of 3.4% and with its bottom line due to rise by 5% in each of the next two years, further growth in shareholder payouts could be on the horizon.

However, due to Fidessa having a price-to-earnings (P/E) ratio of over 30, now may not be the right time to buy it. Certainly, it may perform well as a business, but for investors there could be better opportunities available elsewhere.

Growth ahead but losses for now

Meanwhile, life sciences and animal care market specialist Avacta (LSE: AVTC) has today released a pre-close trading update prior to the release of its full-year results. Revenues for the year have increased by around 19%, which is in line with market expectations. Although losses almost doubled to £4.6m, this was at least partly due to a change in accounting policy. And with Avacta making strong progress in the development of its Affimer affinity purification systems, its shares could offer improved performance following their 36% fall since the start of the year.

Looking ahead, Avacta expects to continue to grow the pipeline of its Affimer technology evaluations, many of which are now on-going. It anticipates that this will ultimately deliver a flow of ‘Affimer powered’ products to positively catalyse its long-term growth. As such, it has long-term potential, but with it being lossmaking and a relatively small entity, there may be better risk/reward opportunities available elsewhere.

The post 3 stocks set to soar after today’s news flow? appeared first on The Motley Fool UK.

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Peter Stephens owns shares of GlaxoSmithKline. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended Fidessa. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Software star

Shares in IT giant Fidessa Group (LSE: FDSA) were basically unchanged in Thursday trade, despite the release of a positive trading update.

Although trading conditions remain difficult for the software play’s client base, Fidessa advised that

“the themes Fidessa saw during 2015 are continuing, with more opportunities opening up as customers position their businesses for the future.”

Indeed, Fidessa said that it expects the investments made during the recent downturn to leave it well positioned for the near-term and beyond.

The City certainly believes that Fidessa is a company on the rise, and expects earnings to rise 4% in 2016 and 5% in 2017. While subsequent P/E ratings may be a tad heady on paper, a dividend yield of 3.5% through to the end of next year helps to mitigate these elevated multiples. I reckon Fidessa could prove a canny growth pick as market conditions steadily improve.

Over and out?

Things are not quite as bubbly over at digital radio manufacturer Sepura (LSE: SEPU), however. The stock continues to oscillate wildly, and although shares are up 18% in Thursday business, Sepura’s value is still down almost three-quarters since the start of the month.

Sepura announced at the beginning of April that “two significant opportunities” had not been signed-off in time for the close of the year. As a result, the radio specialists expected EBITDA for the period to March 2016 to register between €16m and €20m.

This estimate was confirmed today, with full-year earnings chalked up at €17m. However, the failure of Sepura to close out the orders has placed huge stress on the balance sheet. The company now plans to raise £50m via a rights issue, and has commenced talks with its creditors over possible covenant breaches.

Still, today’s release further illustrated the breakneck demand for Sepura’s gizmos, with organic revenues rising by 10% last year to €145m.

The City consequently expects earnings to surge 96% and 11% in 2017 and 2018 respectively, resulting in P/E ratios of 9.8 times and 9.1 times. And these ultra-low readings suggests that the near-term risks facing Sepura are currently baked into the share price.

WANdisco dances higher

Software play WANdisco (LSE: WAND) has fared much better in Thursday’s session, with an 18% surge taking the stock to levels not seen since last July.

The market became giddy following news that the firm had inked a non-exclusive OEM sales agreement with IBM, a move that will see WANdisco’s Fusion data replication product installed as a standard component for the US giant’s storage and analytics software.

WANdisco advised that

“whilst we expect that revenues will begin to flow during the second half of this year, we will provide further guidance once product launches have taken place and initial customer uptake has been evaluated.”

News of monster deals like these should, of course, make investors sit up. But the full financial impact of this latest accord is yet to be evaluated. And in the meantime, WANdisco is likely to remain at the mercy of variability in new contract bookings.

The City expects the tech play to remain in the red for the foreseeable future, with losses of 67 US cents and 55 cents expected for 2016 and 2017 respectively. I reckon investors should give WANdisco a miss until it can show signs of sustained revenues growth.

The post Should you buy WANdisco plc, Fidessa Group plc & Sepura plc & today? appeared first on The Motley Fool UK.

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

In control

Shares in instruments and controls specialist Spectris (LSE: SXS) took off during the course of last week, gaining 19% between last Monday and Friday. Investor appetite was helped following Spectris’s latest financials on Tuesday, which showed that sales had edged 1% higher in 2015 to £1.2bn.

This was a solid performance given the challenging state of the firm’s end markets, and revenues are anticipated to pick up, with the company planning further product launches and acquisitions. Indeed, Spectris bought out Switzerland’s CAS Clean Air Service just today.

With heavy restructuring also ticking along nicely, the City expects the London firm to bounce from recent earnings losses and punch a 23% earnings jump in 2016. This leaves Spectris dealing on an attractive P/E rating of just 14.8 times, while a sub-1 PEG rating, at 0.7, underlines the firm’s decent value relative to its growth prospects.

On top of this, a predicted 52.5p per share dividend — yielding a handy 3% — sweetens the investment case.

Software strider

Software provider Fidessa (LSE: FDSA) also enjoyed a massive share price ascent during the course of last week, the stock adding 29% between Monday and Friday.

Like Spectris, Fidessa benefitted from strong full-year numbers, the company advising last Monday that revenues leapt 7% in 2015 to £295.5m despite volatile trading conditions. And encouragingly the firm advised that its end markets “continue to improve with increasing opportunity for new services.”

The number crunchers do not believe that Fidessa will enjoy explosive bottom-line growth in the near-term, however, and a predicted 2% advance leaves the business dealing on an elevated P/E rating of 23.9 times. But a predicted dividend of 86.8p per share, yielding a huge 4.4%, helps to offset the high multiple.

A power pick

While it is true that resurgent risk appetite has propelled stock markets higher over the past week, there is no doubt that plenty of ‘mud’ — from fears over extreme Chinese cooling to the outcome of June’s ‘Brexit’ vote — remains in the system that could drive share prices through the floor again.

As a consequence, demand for quality defensive companies remains very much alive, a factor that helped to drive National Grid (LSE: NG) 3% higher between last Monday and Friday. And I expect the electricity network operator to keep chugging higher as the fruits of its vast investment programme in the UK and US drive earnings in the near-term and beyond.

The City expects National Grid to enjoy a 4% earnings bounce in the year to March 2016 alone, resulting in a very-decent P/E rating of 14.9 times. And when you also factor in a projected dividend of 43.7p per share — yielding a mammoth 4.8% — I believe there is plenty of room for the power play’s shares to positively re-rate.

The post Can Last Week’s Winners National Grid plc, Spectris plc & Fidessa Group plc Keep Charging? appeared first on The Motley Fool UK.

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

Looking ahead, Fidessa’s end markets continue to improve and it believes there are increasing opportunities for new services, with a strengthening pipeline on offer throughout the business. Furthermore, with Fidessa reassuring its investors that its current level of investment won’t hurt its potential to pay dividends in future, its appeal as an income stock remains relatively high – especially since it yields 4.6% at the present time.

However, with Fidessa trading on a price-to-earnings (P/E) ratio of 23.3, its shares appear to be overpriced in a relatively cheap wider market. As such, there may be better options available elsewhere.

Fashionable-but-unappealing

Also lacking value for money are shares in ASOS (LSE: ASC). The online fashion retailer recently reported positive results for the key Christmas trading period, with retail sales increasing by a very impressive 22%. Furthermore, the company remains on track to deliver on its full-year guidance and with a strong balance sheet and impressive cash position, it appears to be well-placed to deliver on its long-term growth strategy.

Despite its potential as a business, ASOS continues to lack appeal as an investment. That’s largely because it trades on a P/E ratio of 49.1, which indicates considerable downside potential and a lack of upward rerating prospects. That’s especially the case since ASOS is forecast to grow its bottom line by 23% this year, which puts it on a price-to-earnings growth (PEG) ratio of over two. Therefore, with the prospects for the stock market and the consumer spending space being uncertain, it may be prudent to avoid ASOS at the present time.

Encouraging investment?

Meanwhile, Tesco’s (LSE: TSCO) Christmas trading update was perhaps better than many investors expected. For example, it recorded like-for-like (LFL) sales growth of 2.1% over the six-week Christmas period, with a particularly strong performance being delivered by its international operations. That part of Tesco saw LFL sales increase by 4.1% versus the comparable period from last year and this indicates that the company’s new strategy is gaining traction in an improving macroeconomic environment.

Looking ahead, Tesco appears to offer excellent value for money as evidenced by its PEG ratio of just 0.2. And with the likes of Aldi and Lidl unlikely to be able to sustain their previous rates of growth simply due to them becoming more mature businesses with more limited expansion potential, the outlook for Tesco and its investors remains encouraging. As such, now appears to be a good time to buy it for the long term.

The post Do The Latest Updates From Tesco PLC, ASOS plc And Fidessa Group plc Confirm Their Recovery Potential? appeared first on The Motley Fool UK.

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Peter Stephens owns shares of Tesco. The Motley Fool UK owns shares of and has recommended ASOS. The Motley Fool UK has recommended Fidessa. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Reckitt Benckiser Group

Shares in household goods manufacturer Reckitt Benckiser Group (LSE: RB) bumped 2.1% higher in Wednesday trading thanks to yet another positive trading update. The business advised that like-for-like revenues chugged 7% higher during July-September, to £2.2bn, and representing an acceleration from the 5% advance in the prior quarter.

Reckitt Benckiser experienced “continued broad-based growth throughout our European and North American ‘Powermarkets‘, and double-digit growth in developing markets,” it advised, driven in no small part by so-called ‘Powerbrands’ like Durex condoms and Finish dishwasher tablets. And Reckitt Benckiser hiked its underlying sales target for 2015, to 5%, on the back of its strong recent performance.

And I believe the terrific pricing power of Reckitt Benckiser’s brands, combined with rising consumer spending power across the globe, should continue delivering robust revenues growth well into the future. The City expects the company to deliver a 3% earnings bounce in 2015 alone, resulting in a slightly-heady P/E ratio of 25.1 times. But I believe the standout quality of Reckitt Benckiser’s products, not to mention stirring progress across the globe, fully merits this premium.

Merlin Entertainments

Theme park specialists Merlin Entertainments (LSE: MERL) have had a tough year thanks to the fallout of the Alton Towers rollercoaster tragedy in the summer. The business has suffered from lower footfall as thrillseekers have stayed away from its attractions, and like-for-like revenues at its Resort Theme Parks sunk 2% during January-June as a result.

I have previously championed the long-term prospects of Merlin Entertainments thanks to its leading position in a fast-growing industry, however. And the firm’s promising outlook was given a further boost in Wednesday trading following news it has inked an accord with China Media Capital to build one of its highly-successful Legoland amusement parks in Shanghai. The business has previously touted Asia as a strong growth lever for the years ahead.

 Shares in Merlin Entertainments were recently 4.4% higher in midweek business, and I believe further strength can be expected as earnings gallop steadily higher. A 1% bottom-line decline is anticipated for 2015 thanks to the Alton Towers accident, but a solid 15% bounceback is predicted for the following year. Consequently a P/E ratio of 21 times for the current period slips to a much-improved 18.3 times for 2016.

Fidessa Group

Trading systems provider Fidessa Group (LSE: FDSA) also joined the party in Wednesday trading and was last 5.1% higher from Tuesday’s close. The firm advised in a bubbly trading update that it has witnessed “customer markets entering a new phase of recovery as the impact from regulatory and structural changes strengthens,” boosting new business activity since July as well as increasing the investment pipeline.

This increasingly-encouragingly outlook, combined with strong cash generation and a lack of debt, prompted Fidessa to announce that it expects to shell out another special dividend at the time of its preliminary results in February.

The news will come as music to the ears of dividend hunters — the business is already expected to produce dividends of 84.5p per share in 2015 and 87.2p the following year, producing chunky yields of 4.6% and 4.7% correspondingly. Fidessa is expected to overcome a 3% earnings dip in 2015 with a 5% rise in 2016, and although P/E ratios of 24 times for 2015 and 22.6 times for 2016 are hardly exceptional, I believe the tech play’s improving market outlook and chunky dividends more than compensate for these readings.

The post Should You Buy Reckitt Benckiser Group Plc, Merlin Entertainments PLC & Fidessa Group plc Following Wednesday’s News? appeared first on The Motley Fool UK.

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

Today, half-year results are out for test & inspection service provider Intertek Group (LSE: ITRK) defence industry supplier Ultra Electronic Holdings (LSE: ULE) and financial software company Fidessa Group (LSE: FDSA).

Bouncing back

Fears about a weak oil price environment dragging on Intertek Group’s profitability seem over-blown. The shares were weak during 2014, but look perky this morning, perhaps indicating the path of least resistance may now be ‘up’.

Compared to a year ago, the firm’s fist half saw revenue rise 3.5%, adjusted cash from operations grow 14.4%, adjusted earnings per share up 6.7%, which all helped a 6.3% hike in the dividend.

Such figures don’t come from a firm on its knees. The directors reckon the global testing, inspection and certification market will continue to benefit from exciting growth prospects driven by what they describe as global trade flows, global demand for energy, expanding regulations, more complex supply chains, technological innovation and increased demand for higher quality and more sustainable products.

Those buying near the bottom of the 35% or so retreat in the share price since the heady peaks reached during 2013 look vindicated by these results. Yet it’s not too late to run your analysis on this quality business — perhaps after waiting for today’s results-induced spike to subside.

Pedestrian

It’s a different story from Ultra Electonics Holdings where most financial performance figures are a bit down. The firm’s chief executive reckons the results reflect a generally lower level of activity across most parts of the company’s government related business, with the effect increased by a pause in normal business due to the UK and US election cycles.

The firm expects better results in the second half of its trading year according to the traditional weighting of its income. However, City analysts following Ultra Electronics expect a 2% earnings contraction for 2015 overall.

Defence suppliers are often touted as ‘defensive’ investments, because of the consistent nature of cash flow. In fairness, the directors did hike the payout by 4.5% with these interims. Yet, at today’s share price of 1747p, Ultra Electronics yields just 2.8% for 2016 and the firm’s five-year share price record is pedestrian. There’s nothing here to excite me, so I’m avoiding the company’s shares.

Highly rated

With revenue rising 3% and profits falling 3%, Fidessa Group’s share price drop this morning seems like an adjustment of expectations — the shares had risen a fair bit leading up to today’s interims.

Fidessa’s strong niche serving the financial industry has seen the firm grow steadily and the share price rather more recklessly. Today’s forward price-to-earnings rating around 25 looks rich set against City analysts’ expectations of an 8% uplift in earnings during 2016. So, when investor expectations are high, any wobble on earnings growth can cause volatility in the firm’s share price, as we are seeing today.

The chief executive reckons the firm’s customer markets are starting to enter a new phase of recovery as regulatory and structural changes begin to take effect. More regulatory change results in more opportunities for Fidessa and a strengthening pipeline of business. However, he offers a warning that competition within the industry is increasing, which could lead to further closures and consolidations. There could be stronger headwinds during 2016.

The post Is It Time To Invest In Intertek Group plc, Ultra Electronics Holdings plc And Fidessa Group? appeared first on The Motley Fool UK.

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