Having run my usual searches through Company REFS, Treatt PLC caught my eye this week. I hadn’t noticed the business until now. However, with broker forecasts recently available from Investec Securities and Edison, the business has leapt onto my radar having met my five key performance metrics. Time to take a closer look I thought.
Now, I’m a bit of an armchair (sorry?!) environmentalist. While I don’t go around hugging trees, I do try to live responsibly. So, you won’t be surprised to know that I was initially drawn in by the use of the words Fair-trade and Organic in their listed primary activities as an ingredients supplier. However, peeling away the layers, I found an innovative array of flavours, fragrance and personal care products – including a very topical natural sugar substitute – generating ongoing sales across the world to food, beverage, soap and perfumery businesses.
That’s a range of products to a range of suppliers in a range of countries – all supplied through socially responsible and ethical business practices. That’s ticking a number of boxes for me.
Moving on to the fundamentals…
Pretax profits have increased each year over the last 5 years with the broker’s (mentioned above) forecasting significant growth in 2017.
That was re-enforced by a trading statement by the business on 23rd February suggesting – “…the board now believes that profit before tax for the financial year ending 30 September 2017 will substantially exceed its previous expectations”
This projected growth has had a positive impact on Treatt’s PEG ratio which is now showing a healthy 0.70, while the P/E Ratio is currently at 17.5, suggesting room for share price growth. Now, I like to ensure that any stock I put forward for you isn’t geared too highly. And that is the case here. Whilst the business has gearing levels that are a little above its sector average, the Quick Ratio and Current Ratio suggests Treatt can comfortably cover its payments. With low interest rates, it’s very cheap to borrow money and I am encouraged to see that the business is putting that money to good use with a strong Return on Capital Employed (21.3%)
The share price has shown strong growth over 1 month, 3 month, 6 month and 12 month periods and Non-Executive Director, Richard Illek has dipped into his pocket this year to purchase a not too shabby £100k worth of stock. Here’s the Treatt PLC share price graph.
Graph source: Hargreaves Lansdown
For those of you that like a high yielding dividend stock to take advantage of compounding, the dividend yield is expected to be 1.67% in 2017, growing to 1.82% in 2018.
So, there’s my case for Treatt PLC to enter our growth stock feature. If you have any thoughts on this or any other of my growth stocks, feel free to visit the Growth Stocks forum and have your say.
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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 tool and I would really recommend you take a look.