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Are Universe Group [LON:UNG] set for lift off?


AIM listed point of sale, payment and on-line loyalty solutions and systems provider, Universe Group PLC, have recently made their way on to our watch list, having met our growth stock criteria.

Having undergone a period of development over the past 12 months or so, the business appears to be in good shape to increase sales and earnings in 2017/18 according to Chairman, Robert Goddard who suggests:

“We remain very encouraged by market interest in our solutions and this bodes well for 2017 and beyond.”

So, who are Universe Group?

Well, in short, Universe Group are a British financial technology company. They design, build, install and support systems in over 8,000 retail sites – processing over 6 billion transactions each year through their data centres.

They provide point of sale and back office systems, a range of payment technology from hand held devices to outdoor forecourt terminals and loyalty solutions – all through their htec brand.

The business boasts supermarket retailer, Morrisons, as a customer alongside convenience and forecourt brands such as Costcutter, Moto, Budgens, Nisa, Gulf and OneStop.

The vast majority of the group’s business is within the UK. At the last financial year end, this accounted for 82% of sales. This suggests that performance is likely to be influenced by the UK economy. However, aligning with forecourts and food retailers, Universe Group is focusing on areas that tend to be better able to withstand any economic downturn.

Sales were down last year and it is worth noting that 2016 was a year of significant investment in new product offerings. Their next generation point of sale, back office and head office solutions, cloud-based digital advertising products, self-checkout tills and tobacco dispensing technology were all available to customers for the first time in 2016.

Revenues dipped 3.0% last year as certain planned customer deployments slipped beyond the financial year end. However, profit before tax still rose by 20.0% last year, to £2.01m.

The fundamentals

The business has increased pre-tax profits each year over the last 5 years, with forecasts expected to show a further increase over the next two years.

The forecasts have contributed to the attractive PEG ratio of 0.92 and forward P/E Ratio of 11.2 suggesting that there is plenty of room for share price growth.

CEO Jeremy Lewis certainly thinks so. With purchases totaling £25k over the last three months, he is certainly backing himself.

Share price growth over the last few months has been strong, up 10% over a one month period and 30% over six months. However, investors should note that the share price has reached these levels before. The question now is – can the business push on?

Universe Group Share Pric Graph

Source: Hargreaves Lansdown

Following their period of investment and development (which I’d suggest may explain share price performance in 2016), Universe Group appears to be in good shape financially. The quick ratio suggests the business is well positioned to pay its borrowings and interest cover sits at a healthy 16x.

So, there’s my case for Universe Group 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.

Check out other featured Growth Stocks

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.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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