| IMI PLC (GB00BGLP8L22) | |||
21,24 GBXStand (close): 03.07.25 |
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| Datum / Uhrzeit | Titel | Bewertung |
| 14.04.25 07:44:32 | IMI (LON:IMI) shareholders have earned a 19% CAGR over the last five years |  |
| IMI plc (LON:IMI) shareholders have seen the share price descend 16% over the month. But that doesn't change the fact that the returns over the last five years have been very strong. We think most investors would be happy with the 109% return, over that period. To some, the recent pullback wouldn't be surprising after such a fast rise. Only time will tell if there is still too much optimism currently reflected in the share price. So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS). Over half a decade, IMI managed to grow its earnings per share at 12% a year. This EPS growth is slower than the share price growth of 16% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth. You can see how EPS has changed over time in the image below (click on the chart to see the exact values).LSE:IMI Earnings Per Share Growth April 14th 2025 This free interactive report on IMI's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further. What About Dividends? It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for IMI the TSR over the last 5 years was 134%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence! A Different Perspective IMI shareholders are down 6.1% for the year (even including dividends), but the market itself is up 1.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 19%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand IMI better, we need to consider many other factors. For example, we've discovered 1 warning sign for IMI that you should be aware of before investing here. Story Continues We will like IMI better if we see some big insider buys. While we wait, check out this freelist of undervalued stocks (mostly small caps) with considerable, recent, insider buying. Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges. Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. View Comments |
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| 31.03.25 05:06:16 | IMI Full Year 2024 Earnings: EPS Misses Expectations |  |
| IMI (LON:IMI) Full Year 2024 Results Key Financial Results Revenue: UK£2.21b (flat on FY 2023). Net income: UK£248.5m (up 4.7% from FY 2023). Profit margin: 11% (in line with FY 2023). EPS: UK£0.96 (up from UK£0.92 in FY 2023).LSE:IMI Revenue and Expenses Breakdown March 31st 2025 All figures shown in the chart above are for the trailing 12 month (TTM) period IMI EPS Misses Expectations Revenue was in line with analyst estimates. Earnings per share (EPS) missed analyst estimates by 7.1%. The primary driver behind last 12 months revenue was the Automation segment contributing a total revenue of UK£1.41b (64% of total revenue). Notably, cost of sales worth UK£1.17b amounted to 53% of total revenue thereby underscoring the impact on earnings. The largest operating expense was General & Administrative costs, amounting to UK£428.1m (54% of total expenses). Explore how IMI's revenue and expenses shape its earnings. Looking ahead, revenue is forecast to grow 4.2% p.a. on average during the next 3 years, compared to a 4.9% growth forecast for the Machinery industry in the United Kingdom. Performance of the British Machinery industry. The company's shares are down 2.1% from a week ago. Risk Analysis Before we wrap up, we've discovered 1 warning sign for IMI that you should be aware of. Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. View Comments |
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| 17.03.25 05:13:45 | Is There An Opportunity With IMI plc's (LON:IMI) 22% Undervaluation? | |
| Key Insights Using the 2 Stage Free Cash Flow to Equity, IMI fair value estimate is UK£25.30 IMI's UK£19.77 share price signals that it might be 22% undervalued Analyst price target for IMI is UK£22.15 which is 12% below our fair value estimate In this article we are going to estimate the intrinsic value of IMI plc (LON:IMI) by projecting its future cash flows and then discounting them to today's value. This will be done using the Discounted Cash Flow (DCF) model. It may sound complicated, but actually it is quite simple! We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you. View our latest analysis for IMI The Calculation We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today's value: 10-year free cash flow (FCF) estimate 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (£, Millions) UK£306.1m UK£342.7m UK£370.6m UK£413.0m UK£413.0m UK£415.8m UK£420.7m UK£427.1m UK£434.5m UK£442.9m Growth Rate Estimate Source Analyst x6 Analyst x6 Analyst x2 Analyst x1 Analyst x1 Est @ 0.69% Est @ 1.17% Est @ 1.51% Est @ 1.75% Est @ 1.91% Present Value (£, Millions) Discounted @ 7.9% UK£284 UK£295 UK£295 UK£305 UK£283 UK£264 UK£248 UK£233 UK£220 UK£208 ("Est" = FCF growth rate estimated by Simply Wall St) Present Value of 10-year Cash Flow (PVCF) = UK£2.6b After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.3%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 7.9%. Story Continues Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = UK£443m× (1 + 2.3%) ÷ (7.9%– 2.3%) = UK£8.1b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= UK£8.1b÷ ( 1 + 7.9%)10= UK£3.8b The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is UK£6.5b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of UK£19.8, the company appears a touch undervalued at a 22% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out.LSE:IMI Discounted Cash Flow March 17th 2025 The Assumptions We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at IMI as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 7.9%, which is based on a levered beta of 1.085. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. SWOT Analysis for IMI Strength Earnings growth over the past year exceeded the industry. Debt is well covered by earnings and cashflows. Dividends are covered by earnings and cash flows. Weakness Earnings growth over the past year is below its 5-year average. Dividend is low compared to the top 25% of dividend payers in the Machinery market. Opportunity Annual revenue is forecast to grow faster than the British market. Trading below our estimate of fair value by more than 20%. Threat Annual earnings are forecast to grow slower than the British market. Looking Ahead: Whilst important, the DCF calculation ideally won't be the sole piece of analysis you scrutinize for a company. It's not possible to obtain a foolproof valuation with a DCF model. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. What is the reason for the share price sitting below the intrinsic value? For IMI, there are three pertinent factors you should consider: Risks: Take risks, for example - IMI has 1 warning sign we think you should be aware of. Future Earnings: How does IMI's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! PS. Simply Wall St updates its DCF calculation for every British stock every day, so if you want to find the intrinsic value of any other stock just search here. Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. View Comments |
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| 03.03.25 05:04:33 | IMI (LON:IMI) Is Increasing Its Dividend To £0.211 | |
| IMI plc's (LON:IMI) dividend will be increasing from last year's payment of the same period to £0.211 on 16th of May. Despite this raise, the dividend yield of 1.6% is only a modest boost to shareholder returns. See our latest analysis for IMI IMI's Payment Could Potentially Have Solid Earnings Coverage If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, IMI's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow. Looking forward, earnings per share is forecast to rise by 37.4% over the next year. If the dividend continues on this path, the payout ratio could be 22% by next year, which we think can be pretty sustainable going forward.LSE:IMI Historic Dividend March 3rd 2025 Dividend Volatility The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was £0.371, compared to the most recent full-year payment of £0.311. This works out to be a decline of approximately 1.8% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges. The Dividend Looks Likely To Grow With a relatively unstable dividend, it's even more important to see if earnings per share is growing. IMI has seen EPS rising for the last five years, at 11% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time. We Really Like IMI's Dividend Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock. Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for IMI that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers. Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. View Comments |
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| 01.03.25 13:00:39 | IMI PLC (IMIAF) (FY 2024) Earnings Call Highlights: Strong Financial Performance and Strategic ... | |
| Release Date: February 28, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Positive Points IMI PLC (IMIAF) reported a strong financial performance in 2024, with 4% organic sales growth and 10% organic adjusted operating profit growth. The company increased its adjusted operating margins by 100 basis points to 19.7% and set a new medium-term margin target of 20% plus. IMI PLC (IMIAF) announced a 10% increase in the final dividend and a 200 million pounds share buyback program, reflecting confidence in future performance. The company expects to generate over a billion pounds in free cash flow over the next three years, indicating strong cash generation capabilities. IMI PLC (IMIAF) successfully managed a cyber incident, returning to normal operations swiftly and enhancing IT security measures. Negative Points The company faced foreign exchange and tax rate headwinds, which impacted adjusted basic EPS growth, limiting it to 5% higher than 2023. Restructuring costs were higher than initially estimated, totaling 48 million pounds in 2024, which affected overall financial performance. The life sciences sector experienced a 2% decline in organic revenue, with no forecasted recovery in the near term. Industrial automation saw a 3% decline in organic revenue due to softer markets in Europe and the Americas. The company anticipates a one-off exceptional charge of 20 to 25 million pounds in 2025 related to IT systems recovery and infrastructure upgrades following the cyber incident. Q & A Highlights Warning! GuruFocus has detected 6 Warning Sign with IMIAF. Q: Can you provide insights into the process automation order book and its impact on 2025 growth? A: The process automation order book increased by nearly 100 million pounds last year, with a book-to-bill ratio of 1.12%. This includes a significant marine order that will be shipped over several years. The strong order book underpins growth for 2025, and we expect continued robust growth from process automation. - Respondent: CEO Q: Are there any significant new platform launches in life sciences, and how do you view inventory dynamics? A: We have secured several future platforms in analytical and medical devices, but we are not predicting a recovery in the life sciences market. The sector represents 7% of our business, and while there is increased use of reagents, we anticipate a flat year for life sciences. - Respondent: CEO Q: Can you explain the strong growth in climate control despite weaknesses in the residential sector? A: The growth was primarily driven by geographic factors, particularly in Germany, due to new standards and regulations around energy savings. Our business focuses on energy-efficient products, and the majority of our sales are in Europe, where energy-saving regulations are stringent. - Respondent: CEO Story Continues Q: What is the outlook for industrial automation, and how is the Growth Hub contributing to margin targets? A: The 60-day moving average for industrial automation orders is slightly negative, impacted by the cyber event. However, the Growth Hub is driving margin accretive projects across various sectors, contributing to our confidence in achieving margins above 20% in the medium term. - Respondent: CEO Q: How does the M&A landscape look, and what is your approach to acquisitions? A: The M&A pipeline is robust, with a focus on private companies that can enhance our core business. We maintain strict discipline on pricing and return on invested capital. Our strategy is to acquire businesses that align with our growth markets and provide strong financial returns. - Respondent: CEO For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. View Comments |
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| 01.03.25 07:50:40 | Is IMI plc's (LON:IMI) Recent Stock Performance Tethered To Its Strong Fundamentals? | |
| IMI (LON:IMI) has had a great run on the share market with its stock up by a significant 10.0% over the last three months. Since the market usually pay for a company’s long-term fundamentals, we decided to study the company’s key performance indicators to see if they could be influencing the market. In this article, we decided to focus on IMI's ROE. Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. Put another way, it reveals the company's success at turning shareholder investments into profits. See our latest analysis for IMI How To Calculate Return On Equity? ROE can be calculated by using the formula: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for IMI is: 23% = UK£249m ÷ UK£1.1b (Based on the trailing twelve months to December 2024). The 'return' is the amount earned after tax over the last twelve months. So, this means that for every £1 of its shareholder's investments, the company generates a profit of £0.23. What Has ROE Got To Do With Earnings Growth? So far, we've learned that ROE is a measure of a company's profitability. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes. IMI's Earnings Growth And 23% ROE To begin with, IMI has a pretty high ROE which is interesting. Second, a comparison with the average ROE reported by the industry of 15% also doesn't go unnoticed by us. This probably laid the groundwork for IMI's moderate 11% net income growth seen over the past five years. We then performed a comparison between IMI's net income growth with the industry, which revealed that the company's growth is similar to the average industry growth of 9.3% in the same 5-year period.LSE:IMI Past Earnings Growth March 1st 2025 Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. Doing so will help them establish if the stock's future looks promising or ominous. What is IMI worth today? The intrinsic value infographic in our free research report helps visualize whether IMI is currently mispriced by the market. Is IMI Using Its Retained Earnings Effectively? IMI has a healthy combination of a moderate three-year median payout ratio of 30% (or a retention ratio of 70%) and a respectable amount of growth in earnings as we saw above, meaning that the company has been making efficient use of its profits. Story Continues Moreover, IMI is determined to keep sharing its profits with shareholders which we infer from its long history of paying a dividend for at least ten years. Upon studying the latest analysts' consensus data, we found that the company is expected to keep paying out approximately 25% of its profits over the next three years. Accordingly, forecasts suggest that IMI's future ROE will be 23% which is again, similar to the current ROE. Summary In total, we are pretty happy with IMI's performance. Specifically, we like that the company is reinvesting a huge chunk of its profits at a high rate of return. This of course has caused the company to see substantial growth in its earnings. On studying current analyst estimates, we found that analysts expect the company to continue its recent growth streak. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company. Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. View Comments |
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| 01.02.25 09:39:16 | IMI (LON:IMI) Is Aiming To Keep Up Its Impressive Returns | |
| To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. That's why when we briefly looked at IMI's (LON:IMI) ROCE trend, we were very happy with what we saw. Return On Capital Employed (ROCE): What Is It? For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for IMI: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.23 = UK£385m ÷ (UK£2.6b - UK£886m) (Based on the trailing twelve months to June 2024). Thus, IMI has an ROCE of 23%. In absolute terms that's a great return and it's even better than the Machinery industry average of 14%. View our latest analysis for IMI LSE:IMI Return on Capital Employed February 1st 2025 In the above chart we have measured IMI's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for IMI . What Does the ROCE Trend For IMI Tell Us? IMI deserves to be commended in regards to it's returns. The company has employed 33% more capital in the last five years, and the returns on that capital have remained stable at 23%. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. If these trends can continue, it wouldn't surprise us if the company became a multi-bagger. The Key Takeaway In short, we'd argue IMI has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. Therefore it's no surprise that shareholders have earned a respectable 97% return if they held over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research. IMI does have some risks though, and we've spotted 1 warning sign for IMI that you might be interested in. IMI is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals. Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. View Comments |
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| 19.10.24 09:56:32 | Investing in IMI (LON:IMI) five years ago would have delivered you a 99% gain | |
| When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the IMI plc (LON:IMI) share price is up 80% in the last 5 years, clearly besting the market return of around 2.7% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 26%, including dividends. So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress. View our latest analysis for IMI To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS). Over half a decade, IMI managed to grow its earnings per share at 9.6% a year. This EPS growth is slower than the share price growth of 12% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth. You can see how EPS has changed over time in the image below (click on the chart to see the exact values). earnings-per-share-growth It might be well worthwhile taking a look at our freereport on IMI's earnings, revenue and cash flow. What About Dividends? It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for IMI the TSR over the last 5 years was 99%, which is better than the share price return mentioned above. This is largely a result of its dividend payments! A Different Perspective It's good to see that IMI has rewarded shareholders with a total shareholder return of 26% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 15% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand IMI better, we need to consider many other factors. For instance, we've identified 1 warning sign for IMI that you should be aware of. Story continues If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this freelist of companies that have proven they can grow earnings. Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges. Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. View comments |
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| 05.10.24 08:50:33 | Is IMI plc (LON:IMI) Trading At A 25% Discount? | |
| Key Insights IMI's estimated fair value is UK£24.20 based on 2 Stage Free Cash Flow to Equity IMI's UK£18.06 share price signals that it might be 25% undervalued Analyst price target for IMI is UK£21.28 which is 12% below our fair value estimate Today we'll do a simple run through of a valuation method used to estimate the attractiveness of IMI plc (LON:IMI) as an investment opportunity by taking the expected future cash flows and discounting them to their present value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. Believe it or not, it's not too difficult to follow, as you'll see from our example! Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. View our latest analysis for IMI Crunching The Numbers We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we discount the value of these future cash flows to their estimated value in today's dollars: 10-year free cash flow (FCF) estimate 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (£, Millions) UK£331.9m UK£335.6m UK£339.9m UK£344.9m UK£350.5m UK£356.5m UK£362.8m UK£369.5m UK£376.3m UK£383.4m Growth Rate Estimate Source Analyst x5 Analyst x3 Est @ 1.29% Est @ 1.48% Est @ 1.62% Est @ 1.71% Est @ 1.78% Est @ 1.82% Est @ 1.85% Est @ 1.88% Present Value (£, Millions) Discounted @ 7.1% UK£310 UK£292 UK£276 UK£262 UK£248 UK£236 UK£224 UK£213 UK£202 UK£192 ("Est" = FCF growth rate estimated by Simply Wall St) Present Value of 10-year Cash Flow (PVCF) = UK£2.5b After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 1.9%. We discount the terminal cash flows to today's value at a cost of equity of 7.1%. Story continues Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = UK£383m× (1 + 1.9%) ÷ (7.1%– 1.9%) = UK£7.5b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= UK£7.5b÷ ( 1 + 7.1%)10= UK£3.8b The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is UK£6.2b. The last step is to then divide the equity value by the number of shares outstanding. Compared to the current share price of UK£18.1, the company appears a touch undervalued at a 25% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. dcf Important Assumptions The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. If you don't agree with these result, have a go at the calculation yourself and play with the assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at IMI as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 7.1%, which is based on a levered beta of 1.076. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. SWOT Analysis for IMI Strength Earnings growth over the past year exceeded the industry. Debt is well covered by earnings and cashflows. Dividends are covered by earnings and cash flows. Weakness Earnings growth over the past year is below its 5-year average. Dividend is low compared to the top 25% of dividend payers in the Machinery market. Opportunity Annual revenue is forecast to grow faster than the British market. Good value based on P/E ratio and estimated fair value. Threat Annual earnings are forecast to grow slower than the British market. Next Steps: Valuation is only one side of the coin in terms of building your investment thesis, and it is only one of many factors that you need to assess for a company. It's not possible to obtain a foolproof valuation with a DCF model. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. What is the reason for the share price sitting below the intrinsic value? For IMI, we've put together three fundamental factors you should further research: Risks: Be aware that IMI is showing 1 warning sign in our investment analysis, you should know about... Future Earnings: How does IMI's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the LSE every day. If you want to find the calculation for other stocks just search here. Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. View comments |
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| 19.09.24 14:34:51 | Is IMI plc's (LON:IMI) Stock's Recent Performance A Reflection Of Its Financial Health? | |
| Most readers would already know that IMI's (LON:IMI) stock increased by 3.3% over the past week. Given its impressive performance, we decided to study the company's key financial indicators as a company's long-term fundamentals usually dictate market outcomes. Particularly, we will be paying attention to IMI's ROE today. Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders. See our latest analysis for IMI How Do You Calculate Return On Equity? ROE can be calculated by using the formula: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for IMI is: 23% = UK£253m ÷ UK£1.1b (Based on the trailing twelve months to June 2024). The 'return' is the yearly profit. One way to conceptualize this is that for each £1 of shareholders' capital it has, the company made £0.23 in profit. Why Is ROE Important For Earnings Growth? We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes. IMI's Earnings Growth And 23% ROE To begin with, IMI has a pretty high ROE which is interesting. Secondly, even when compared to the industry average of 13% the company's ROE is quite impressive. This likely paved the way for the modest 11% net income growth seen by IMI over the past five years. As a next step, we compared IMI's net income growth with the industry and found that the company has a similar growth figure when compared with the industry average growth rate of 9.3% in the same period. past-earnings-growth The basis for attaching value to a company is, to a great extent, tied to its earnings growth. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). Doing so will help them establish if the stock's future looks promising or ominous. Has the market priced in the future outlook for IMI? You can find out in our latest intrinsic value infographic research report. Is IMI Making Efficient Use Of Its Profits? IMI has a healthy combination of a moderate three-year median payout ratio of 30% (or a retention ratio of 70%) and a respectable amount of growth in earnings as we saw above, meaning that the company has been making efficient use of its profits. Story continues Moreover, IMI is determined to keep sharing its profits with shareholders which we infer from its long history of paying a dividend for at least ten years. Based on the latest analysts' estimates, we found that the company's future payout ratio over the next three years is expected to hold steady at 25%. Therefore, the company's future ROE is also not expected to change by much with analysts predicting an ROE of 24%. Conclusion Overall, we are quite pleased with IMI's performance. In particular, it's great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. The latest industry analyst forecasts show that the company is expected to maintain its current growth rate. To know more about the company's future earnings growth forecasts take a look at this freereport on analyst forecasts for the company to find out more. Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. View comments |
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