Pinned straw:
When a business with XRF's quality falls 28% in SP within a couple of months I think it warrants a look.
The March quarter trading update (pasted below) revealed a 9% drop in revenue but a 5% increase in profit before tax compared with the PCP.
I suppose the other plausible trigger for the slump in SP is concerns over the effects on mining services secondary to pain in China from tariffs.
In any case I see a PE of 22 as undemanding for a business with long term growth potential, quality management and a strong balance sheet. Looking to add to holdings... (Held IRL)
Finally had a closer look at the XRF March update.
OVERALL
- A rather flattish revenue result from XRF, vs pcp and QoQ
- NPBT looked much better vs pcp and YTD
- XRF’s revenue numbers do bounce around based on the underlying commodity prices for XRF’s products and are typically not a concern so long as NPBT is trending upwards, which is the case this quarter
- Does not appear to be any issues of concern from the operational update given that Vance has consistently used simple and plain language.
Trend Analysis
I chartered the Quarterly and Half-Yearly numbers to get a better sense of the trends:
- XRF’s quarterly revenue and NPBT numbers do bounce around a bit - the quarter-by-quarter trend is mostly flat in the last 3 years
- The upward trend in revenue and NPBT is significantly clearer on a half-yearly basis, which is probably where the focus should be
Price has fallen below the long term 200MA line and the nice 15M uptrend line, indicating a bit of a downward rating. But the retracement is still very much within normal retracement levels and is probably a healthy thing for the price, longer term.
