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SSP Group provided investors with a £100 million special dividend and a 50% increase in its dividend, which drove the SSP Group share price up to 663, although at the time of writing, post dividend hangover had set in and the share price was sliding down towards the 650 mark.



For those who don’t know, SSP Group provides food at train stations and airports where ever-rising numbers of travellers will find themselves shopping to fill their stomachs while waiting for transport which, it seems, is increasingly delayed these days. It owns Ritazza and Upper Crust and has strategic agreements in place with the likes of Yo Sushi and Starbucks.

This is not just a UK-focused stock, however: SSP Group generates over 60% of its sales outside the UK and has been expanding its reach into North America and Asia.

“The only chewy issue is the stock’s valuation,” comments Tom Selby, Senior Analyst with UK broker AJ Bell. “The shares have doubled in the past year to leave them on a forward price/earnings ratio for the year to September 2018 of 30 times compared to a rating of around 15 times for the UK as a whole.”

Selby says that even though consensus earnings and dividend forecasts are likely to move higher, that does price in a lot of good news and means the company must continue to deliver upside surprises on profits to keep  its momentum shareholders happy.

A great deal hinges on the somewhat nebulous criterion of pricing power: strong brands, market share, technological base, or just an installed base of kit. SSP Group trades off its captive audience however – people spend money with it because circumstances have conspired to keep them in one place, waiting for a train or a plane.

The Armchair Trader says:

Investors seem to be leaving as the SSP Group share price begins to tumble back to the 600 mark. It looks as if enthusiasm is wearing off and traders are becoming worried the shares are too expensive. One to look at potentially shorting in the next few days if you are trading with CFDs.

 

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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.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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