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FTSE 250 Bathroom and Kitchen manufacturer, Norcros, has caught the attention of The Armchair Trader team of late. The share price has been on the up largely since the release of a trading update back in early October. Since then, the price has risen from 210p to a high of 305p.

Why are Norcros shares rising?

The Group announced the acquisition of House of Plumbing in early April 2019, a purchase that further strengthened their position in South Africa and joined the market leading stable of businesses in the UK and South Africa that the group has acquired.

The trading statement in October provided confirmation that the House of Plumbing business had been integrated successfully and was performing to expectations.

The Interim Results that Norcros released in November showed that the business was continuing to strengthen, winning market share across all areas despite the challenging market conditions, primarily attributed to the Brexit uncertainty.

The business is heavily aligned with the housebuilding sector and has seen strong organic domestic revenue growth in the UK in addition to the revenue from their new South African acquisition.

Is there more to come?

The Norcros share price is up 44% in the last six months and the relative strength index shows that the stock could be approaching overbought as a result. However, brokers remain bullish on the Group’s prospects. Peel Hunt for instance recently reaffirmed their BUY rating this month.

The consensus for Norcros four broker ratings in BUY with a target price of 317p which, admittedly, isn’t that far away. Turnover, pre-tax profits and earnings per share are all forecast to increase over the next two years.

Norcros has captured investor interest through its recent acquisition. However, the increase in borrowings, which appears comfortably affordable, suggests that the business is likely to be looking at organic growth in the near term.

So where to next for Norcros? Final results are scheduled for release in June. With the Brexit issue soon to be resolved, a burgeoning housebuilding sector and  the successful integration of the South African business, we expect to see good progress.

Data sourced from SharePad. The UK’s no.1 investment data & analysis software for Private Investors as voted for by FT/Investors Chronicle readers.  Discover the advantage at www.sharescope.co.uk/sharepad.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Michael Morton

Michael Morton

Michael has worked within the Financial Industry for more than 20 years. Starting out as a financial analyst, he has extensive experience working with fund management groups and brokerages.

With an interest in Stocks and Shares, Funds, ETFs and Commodities, his investment focus is medium to long term gains, with the objective of financial security on retirement, and building wealth for his young children for their adult life. His broker of choice is Hargreaves Lansdown.

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