AIM listed stock, Inspired Energy PLC, is a provider of energy purchasing and energy consultancy services to large private and public sector organisations.
With a market capitalisation of £73.6million, the business offers energy procurement services to large businesses, aimed at significantly cutting down on energy costs and usage.
Inspired Energy came to my attention yesterday through my usual weekly searches through Company Refs, and then again today today as a result of their acquisition of Irish firm Horizon Energy for £9m. Other recent acquisitions in 2017 include Flexible Energy Management Ltd and the acquisition of Churchcom Ltd.
So, why did Inspired Energy appear in my filters? What makes them a candidate for growth? Let’s take a look at the fundamentals.
Inspired Energy Fundamentals
The business has been consistently growing year on year. Turnover and pretax profits are up every year since 2012. In turn, Earnings Per Share have followed suit.
Looking ahead, forward growth is expected at around the 40% mark, but there’s a note of caution that comes with this forecast. The only broker contributing is Canaccord Genuity. Ideally for a reliable consensus, I’d want to see at least five or six brokers forming a consensus.
We’ll stick with the forward looking ratios as they look extremely appealing – but do bear in mind my thoughts on a reliable consensus.
Ok, so the forward P/E ratio based on the Canaccord Genuity numbers comes in at 9.24 times while the forward PEG (Price/Earnings to Growth) is at 0.23 suggesting significant room for share price growth given the forecast profit for the next two years.
The business is being run effectively with ROCE (Return on Capital Employed) at an impressive 72.2%, which is very good, even for a support services business with low operating costs.
On top of this, profit margin levels are at a very healthy 24.5%.
Share price performance in 2017 hasn’t given shareholders much to cheer so far as you’ll see from the share price graph.
Graph Source: Hargreaves Lansdown
However, investors might be persuaded to wait for share price growth as Inspired Energy’s dividend strategy has seen it increase payments to shareholders each year since 2013. Dividend yield for the current reporting period is expected to top 3% – offering an attractive yield for an AIM listed stock.
As I noted above, the business is currently pursuing an acquisition strategy. Unsurprisingly, gearing is high but manageable when you see the acid test, or quick ratio of 1.35 and interest cover of 7.38 times.
Inspired Energy are next due to report their 6 month figures in late August 2017 which will provide a look at current year performance.
Chairman Michael Fletcher suggested in the 2016 annual report that ’…. the board is confident that the Group will continue to go from strength to strength in 2017″
So, there’s my case for Inspired Energy PLC. If you have any thoughts, or questions, on this or any other of my other growth stock reviews, feel free to visit the Growth Stocks forum and have your say.
Do bear in mind this isn’t a recommendation to buy this stock. The above constitutes my opinion based on the research undertaken. I urge you to do your own research before you invest.
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My thanks as always to JD Financial Publishing for providing access to the Company REFS research tool. They are currently offering a 30-day free trial to this fantastic product and I would urge you take a look.