With the August reporting season nearly upon us, now is an opportune time for investors to review their expectations of what they expect from companies when they report.
One stock I'll be watching closely is Ansell Limited (ASX: ANN) which has rallied nearly 33% in the past year but could still have further to run.
Ansell reports on a June financial year (FY) basis and for the group's interim results to December 2014 the leading manufacturer of latex-based gloves and condoms reported a very strong set of results.
Here's a re-cap:
- Sales jumped 20% to US$847.3 million
- EBIT margin expanded from 11.8% to 14%
- Earnings per share (EPS) gained 16% to US 57.3 cents per share (cps)
- Dividends increased 18% to US 20 cps
Based on consensus numbers, the company is forecast to earn 155.6 cps in FY 2015 with EPS increasing to 175.5 cps and 186.1 cps in FY 2016 and FY 2017 respectively.
With the share price closing the last trading session at $25.48 this implies a price-to-earnings ratio of just 16.4x the earnings forecast for FY 2015. While an adjustment should be made for the lack of franking, this doesn't look a demanding multiple for a company of this calibre.
What's more, there have been a number of positive developments since the interim results were released which could see further positive growth momentum.
- The group announced the sale of a Malaysian property in March for approximately US$23 million which will have strengthened the balance sheet.
- In March Ansell also announced the acquisition of Microgard, a global leader in the manufacture and supply of chemical protective clothing. This US$88 million purchase is forecast to be earnings accretive in FY 2016.
- Then in June management announced a range of cost reduction initiatives including the closure of underutilised offices and the rationalisation of non-core product lines. Benefits from these initiatives are forecast to produce a pre-tax benefit of $15 million in FY 2017.
