| Spirax-Sarco Engineering PLC (GB00BWFGQN14) | |||
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| 20.04.25 08:09:53 | Spirax Group's (LON:SPX) Returns Have Hit A Wall |  |
| Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So, when we ran our eye over Spirax Group's (LON:SPX) trend of ROCE, we liked what we saw. Our free stock report includes 1 warning sign investors should be aware of before investing in Spirax Group. Read for free now. What Is Return On Capital Employed (ROCE)? For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Spirax Group: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.14 = UK£298m ÷ (UK£2.6b - UK£533m) (Based on the trailing twelve months to December 2024). So, Spirax Group has an ROCE of 14%. That's a pretty standard return and it's in line with the industry average of 14%. View our latest analysis for Spirax Group LSE:SPX Return on Capital Employed April 20th 2025 Above you can see how the current ROCE for Spirax Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Spirax Group for free. What Can We Tell From Spirax Group's ROCE Trend? While the current returns on capital are decent, they haven't changed much. The company has consistently earned 14% for the last five years, and the capital employed within the business has risen 46% in that time. 14% is a pretty standard return, and it provides some comfort knowing that Spirax Group has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders. Our Take On Spirax Group's ROCE In the end, Spirax Group has proven its ability to adequately reinvest capital at good rates of return. However, despite the favorable fundamentals, the stock has fallen 28% over the last five years, so there might be an opportunity here for astute investors. That's why we think it'd be worthwhile to look further into this stock given the fundamentals are appealing. Like most companies, Spirax Group does come with some risks, and we've found 1 warning sign that you should be aware of. Story Continues For those who like to invest in solid companies, check out this freelist of companies with solid balance sheets and high returns on equity. 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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| 03.04.25 12:48:47 | Estimating The Fair Value Of Spirax Group plc (LON:SPX) |  |
| Key Insights Using the 2 Stage Free Cash Flow to Equity, Spirax Group fair value estimate is UK£59.55 Spirax Group's UK£61.70 share price indicates it is trading at similar levels as its fair value estimate Analyst price target for SPX is UK£78.15, which is 31% above our fair value estimate In this article we are going to estimate the intrinsic value of Spirax Group plc (LON:SPX) by projecting its future cash flows and then discounting them to today's value. We will take advantage of the Discounted Cash Flow (DCF) model for this purpose. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine. 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. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. 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. The Calculation 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 start off with, we need to estimate 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£160.2m UK£204.2m UK£240.8m UK£260.5m UK£275.5m UK£288.5m UK£300.0m UK£310.4m UK£320.1m UK£329.4m Growth Rate Estimate Source Analyst x5 Analyst x5 Analyst x3 Analyst x1 Est @ 5.75% Est @ 4.71% Est @ 3.99% Est @ 3.48% Est @ 3.13% Est @ 2.88% Present Value (£, Millions) Discounted @ 8.1% UK£148 UK£175 UK£191 UK£191 UK£187 UK£181 UK£174 UK£166 UK£159 UK£151 ("Est" = FCF growth rate estimated by Simply Wall St) Present Value of 10-year Cash Flow (PVCF) = UK£1.7b Story Continues 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 8.1%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = UK£329m× (1 + 2.3%) ÷ (8.1%– 2.3%) = UK£5.8b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= UK£5.8b÷ ( 1 + 8.1%)10= UK£2.7b The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is UK£4.4b. In the final step we divide the equity value by the number of shares outstanding. Relative to the current share price of UK£61.7, the company appears around fair value at the time of writing. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent.LSE:SPX Discounted Cash Flow April 3rd 2025 Important Assumptions The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own 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 Spirax Group 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 8.1%, which is based on a levered beta of 1.131. 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. Check out our latest analysis for Spirax Group SWOT Analysis for Spirax Group 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 Dividend is low compared to the top 25% of dividend payers in the Machinery market. Expensive based on P/E ratio and estimated fair value. Opportunity Annual revenue is forecast to grow faster than the British market. Threat Annual earnings are forecast to grow slower than the British market. Next Steps: Although the valuation of a company is important, it shouldn't be the only metric you look at when researching 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. For Spirax Group, we've compiled three fundamental elements you should further research: Risks: Be aware that Spirax Group is showing 1 warning sign in our investment analysis , you should know about... Future Earnings: How does SPX'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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| 14.03.25 05:32:16 | Spirax Group's (LON:SPX) Shareholders Will Receive A Bigger Dividend Than Last Year | |
| Spirax Group plc (LON:SPX) has announced that it will be increasing its dividend from last year's comparable payment on the 23rd of May to £1.18. This makes the dividend yield about the same as the industry average at 2.3%. View our latest analysis for Spirax Group Spirax Group's Payment Could Potentially Have Solid Earnings Coverage Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by Spirax Group's earnings. This indicates that quite a large proportion of earnings is being invested back into the business. Looking forward, earnings per share is forecast to rise by 31.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 53% by next year, which is in a pretty sustainable range.LSE:SPX Historic Dividend March 14th 2025 Spirax Group Has A Solid Track Record The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was £0.612 in 2015, and the most recent fiscal year payment was £1.65. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period. The Dividend's Growth Prospects Are Limited Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings have grown at around 2.8% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 2.8% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again. Spirax Group Looks Like A Great Dividend Stock Overall, a dividend increase is always good, and we think that Spirax Group is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock. Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Spirax Group that you should be aware of before investing. Is Spirax Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks. 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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| 12.03.25 12:47:06 | Spirax Group Full Year 2024 Earnings: EPS Beats Expectations | |
| Spirax Group (LON:SPX) Full Year 2024 Results Key Financial Results Revenue: UK£1.67b (down 1.0% from FY 2023). Net income: UK£191.2m (up 4.1% from FY 2023). Profit margin: 12% (in line with FY 2023). EPS: UK£2.59 (up from UK£2.50 in FY 2023).LSE:SPX Earnings and Revenue Growth March 12th 2025 All figures shown in the chart above are for the trailing 12 month (TTM) period Spirax Group EPS Beats Expectations Revenue was in line with analyst estimates. Earnings per share (EPS) surpassed analyst estimates by 2.5%. Looking ahead, revenue is forecast to grow 4.5% p.a. on average during the next 3 years, compared to a 5.0% growth forecast for the Machinery industry in the United Kingdom. Performance of the British Machinery industry. The company's shares are down 5.1% from a week ago. Risk Analysis You should always think about risks. Case in point, we've spotted 1 warning sign for Spirax Group 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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| 03.03.25 05:01:29 | Spirax Group (LON:SPX) sheds UK£254m, company earnings and investor returns have been trending downwards for past three years | |
| For many investors, the main point of stock picking is to generate higher returns than the overall market. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Spirax Group plc (LON:SPX) shareholders have had that experience, with the share price dropping 36% in three years, versus a market return of about 29%. And over the last year the share price fell 29%, so we doubt many shareholders are delighted. Unfortunately the share price momentum is still quite negative, with prices down 10% in thirty days. After losing 4.5% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance. View our latest analysis for Spirax Group To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time. During the three years that the share price fell, Spirax Group's earnings per share (EPS) dropped by 2.3% each year. This reduction in EPS is slower than the 14% annual reduction in the share price. So it seems the market was too confident about the business, in the past. You can see how EPS has changed over time in the image below (click on the chart to see the exact values).LSE:SPX Earnings Per Share Growth March 3rd 2025 It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our freereport on Spirax Group's earnings, revenue and cash flow. What About Dividends? As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of Spirax Group, it has a TSR of -33% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence! A Different Perspective While the broader market gained around 16% in the last year, Spirax Group shareholders lost 28% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.2% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for Spirax Group you should be aware of. Story Continues If you are like me, then you will not want to miss this freelist of undervalued small caps that insiders are 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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| 21.10.24 07:59:43 | Calculating The Fair Value Of Spirax Group plc (LON:SPX) | |
| Key Insights The projected fair value for Spirax Group is UK£77.37 based on 2 Stage Free Cash Flow to Equity Current share price of UK£68.10 suggests Spirax Group is potentially trading close to its fair value Analyst price target for SPX is UK£84.60, which is 9.3% above our fair value estimate Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Spirax Group plc (LON:SPX) as an investment opportunity by estimating the company's future cash flows and discounting them to their present value. We will use the Discounted Cash Flow (DCF) model on this occasion. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow. 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. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model. View our latest analysis for Spirax Group Is Spirax Group Fairly Valued? We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. 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 need to discount the sum of these future cash flows to arrive at a present value estimate: 10-year free cash flow (FCF) forecast 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (£, Millions) UK£184.0m UK£234.6m UK£278.1m UK£304.8m UK£324.5m UK£341.0m UK£355.2m UK£367.5m UK£378.6m UK£388.8m Growth Rate Estimate Source Analyst x8 Analyst x7 Analyst x3 Analyst x3 Est @ 6.46% Est @ 5.10% Est @ 4.15% Est @ 3.48% Est @ 3.02% Est @ 2.69% Present Value (£, Millions) Discounted @ 7.3% UK£171 UK£204 UK£225 UK£230 UK£228 UK£223 UK£216 UK£208 UK£200 UK£191 ("Est" = FCF growth rate estimated by Simply Wall St) Present Value of 10-year Cash Flow (PVCF) = UK£2.1b 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 (1.9%) 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 7.3%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = UK£389m× (1 + 1.9%) ÷ (7.3%– 1.9%) = UK£7.3b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= UK£7.3b÷ ( 1 + 7.3%)10= UK£3.6b 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£5.7b. In the final step we divide the equity value by the number of shares outstanding. Compared to the current share price of UK£68.1, the company appears about fair value at a 12% discount to where the stock price trades currently. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent. dcf The Assumptions The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own 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 Spirax Group 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 7.3%, which is based on a levered beta of 1.117. 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 Spirax Group Strength Debt is well covered by earnings and cashflows. Dividends are covered by earnings and cash flows. Weakness Earnings declined over the past year. 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. Current share price is below our estimate of fair value. Threat Annual earnings are forecast to grow slower than the British market. Moving On: Whilst important, the DCF calculation ideally won't be the sole piece of analysis you scrutinize for a company. The DCF model is not a perfect stock valuation tool. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. For Spirax Group, we've put together three essential factors you should look at: Risks: Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Spirax Group , and understanding it should be part of your investment process. Future Earnings: How does SPX'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. 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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| 23.09.24 10:19:13 | Spirax Group (LON:SPX) shareholders have endured a 51% loss from investing in the stock three years ago | |
| The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of Spirax Group plc (LON:SPX) have had an unfortunate run in the last three years. So they might be feeling emotional about the 53% share price collapse, in that time. And over the last year the share price fell 24%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 17% in the last 90 days. With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies. View our latest analysis for Spirax Group While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price. Spirax Group saw its EPS decline at a compound rate of 2.3% per year, over the last three years. The share price decline of 22% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past. The image below shows how EPS has tracked over time (if you click on the image you can see greater detail). earnings-per-share-growth We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our freereport on Spirax Group's earnings, revenue and cash flow. A Different Perspective Spirax Group shareholders are down 23% for the year (even including dividends), but the market itself is up 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.5% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Spirax Group better, we need to consider many other factors. Take risks, for example - Spirax Group has 1 warning sign we think you should be aware of. Spirax Group is not the only stock insiders are buying. So take a peek at this freelist of small cap companies at attractive valuations which insiders have been buying. Story continues 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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| 02.09.24 07:40:56 | Spirax Group plc's (LON:SPX) Fundamentals Look Pretty Strong: Could The Market Be Wrong About The Stock? | |
| With its stock down 13% over the past three months, it is easy to disregard Spirax Group (LON:SPX). However, stock prices are usually driven by a company’s financials over the long term, which in this case look pretty respectable. In this article, we decided to focus on Spirax Group'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. View our latest analysis for Spirax Group How Do You Calculate Return On Equity? The formula for return on equity is: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for Spirax Group is: 17% = UK£192m ÷ UK£1.2b (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 £0.17 in profit. Why Is ROE Important For Earnings Growth? So far, we've learned that ROE is a measure of a company's profitability. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features. Spirax Group's Earnings Growth And 17% ROE At first glance, Spirax Group seems to have a decent ROE. Especially when compared to the industry average of 13% the company's ROE looks pretty impressive. Yet, Spirax Group has posted measly growth of 2.2% over the past five years. That's a bit unexpected from a company which has such a high rate of return. A few likely reasons why this could happen is that the company could have a high payout ratio or the business has allocated capital poorly, for instance. Next, on comparing with the industry net income growth, we found that Spirax Group's reported growth was lower than the industry growth of 11% over the last few years, which is not something we like to see. past-earnings-growth Earnings growth is an important metric to consider when valuing a stock. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. This then helps them determine if the stock is placed for a bright or bleak future. Is SPX fairly valued? This infographic on the company's intrinsic value has everything you need to know. Story continues Is Spirax Group Using Its Retained Earnings Effectively? Despite having a normal three-year median payout ratio of 50% (or a retention ratio of 50% over the past three years, Spirax Group has seen very little growth in earnings as we saw above. So there could be some other explanation in that regard. For instance, the company's business may be deteriorating. Moreover, Spirax Group has been paying dividends for at least ten years or more suggesting that management must have perceived that the shareholders prefer dividends over earnings growth. Our latest analyst data shows that the future payout ratio of the company over the next three years is expected to be approximately 49%. Accordingly, forecasts suggest that Spirax Group's future ROE will be 18% which is again, similar to the current ROE. Summary On the whole, we do feel that Spirax Group has some positive attributes. Although, we are disappointed to see a lack of growth in earnings even in spite of a high ROE and and a high reinvestment rate. We believe that there might be some outside factors that could be having a negative impact on the business. Having said that, looking at the current analyst estimates, we found that the company's earnings are expected to gain momentum. 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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| 11.08.24 07:29:29 | Spirax Group (LON:SPX) Has Announced A Dividend Of £0.475 | |
| The board of Spirax Group plc (LON:SPX) has announced that it will pay a dividend on the 15th of November, with investors receiving £0.475 per share. Although the dividend is now higher, the yield is only 2.1%, which is below the industry average. Check out our latest analysis for Spirax Group Spirax Group's Dividend Is Well Covered By Earnings The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Spirax Group was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business. Looking forward, earnings per share is forecast to rise by 36.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 50%, which is in the range that makes us comfortable with the sustainability of the dividend. historic-dividend Spirax Group Has A Solid Track Record The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of £0.57 in 2014 to the most recent total annual payment of £1.60. This means that it has been growing its distributions at 11% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period. The Dividend's Growth Prospects Are Limited Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Spirax Group's EPS has declined at around 2.8% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern. Our Thoughts On Spirax Group's Dividend Overall, this is a reasonable dividend, and it being raised is an added bonus. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again. It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Spirax Group that investors should know about before committing capital to this stock. Is Spirax Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks. 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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| 03.06.24 14:06:15 | There Are Reasons To Feel Uneasy About Spirax-Sarco Engineering's (LON:SPX) Returns On Capital | |
| What are the early trends we should look for to identify a stock that could multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Although, when we looked at Spirax-Sarco Engineering (LON:SPX), it didn't seem to tick all of these boxes. Understanding Return On Capital Employed (ROCE) Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Spirax-Sarco Engineering is: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.14 = UK£308m ÷ (UK£2.7b - UK£454m) (Based on the trailing twelve months to December 2023). So, Spirax-Sarco Engineering has an ROCE of 14%. That's a relatively normal return on capital, and it's around the 13% generated by the Machinery industry. See our latest analysis for Spirax-Sarco Engineering roce Above you can see how the current ROCE for Spirax-Sarco Engineering compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our freeanalyst report for Spirax-Sarco Engineering . What The Trend Of ROCE Can Tell Us In terms of Spirax-Sarco Engineering's historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 14% from 23% five years ago. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It may take some time before the company starts to see any change in earnings from these investments. The Key Takeaway To conclude, we've found that Spirax-Sarco Engineering is reinvesting in the business, but returns have been falling. And investors may be recognizing these trends since the stock has only returned a total of 8.5% to shareholders over the last five years. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere. Spirax-Sarco Engineering does have some risks though, and we've spotted 1 warning sign for Spirax-Sarco Engineering that you might be interested in. Story continues If you want to search for solid companies with great earnings, check out this freelist of companies with good balance sheets and impressive returns on equity. 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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