Given the strength of the H2 trading commentary and ensuing earnings upgrades, it is not surprising that NFC shares have been very strong performers year to date (+52% versus FTSE All Share +9%). The references made at the final results to current trading remaining ahead of expectations has laid the ground for what is likely to be a very strong 2021. The group’s evolving mix of digital marketing and direct demand generation, coupled with the persistent strength of the core North American tech client base has seen the group exit the pandemic in rude health. Clearly, tail risks remain but NFC has more than demonstrated its ability to trade through. With the group now operating from a leaner physical footprint, the risks to earnings clearly lie on the upside. The shares are now trading at all time highs in absolute terms and currently stand at a FY22E PE multiple of 18.3x. This PE multiple still represents a discount to the immediate Media peer group but does represent a break-out from the historic 10x – 15x PE range that NFC has typically traded within. The key issue for investors will be the sustainability of current momentum and the implication for margins. In our view, NFC has always been a structural growth story independent of the macro cycle. We also see margins being driven by a combination of revenue mix and cost savings and see no reason why a low 20% EBIT margin cannot be achieved and maintained.
21 Apr 2021
FY21 final results – Organic growth & margin strength
Sign up for free to access
Get access to the latest equity research in real-time from 12 commissioned providers.
Get access to the latest equity research in real-time from 12 commissioned providers.
FY21 final results – Organic growth & margin strength
Next 15 Group plc (NFG:LON) | 893 -241.1 (-3.0%) | Mkt Cap: 887.7m
- Published:
21 Apr 2021 -
Author:
Iain Daly -
Pages:
11
Given the strength of the H2 trading commentary and ensuing earnings upgrades, it is not surprising that NFC shares have been very strong performers year to date (+52% versus FTSE All Share +9%). The references made at the final results to current trading remaining ahead of expectations has laid the ground for what is likely to be a very strong 2021. The group’s evolving mix of digital marketing and direct demand generation, coupled with the persistent strength of the core North American tech client base has seen the group exit the pandemic in rude health. Clearly, tail risks remain but NFC has more than demonstrated its ability to trade through. With the group now operating from a leaner physical footprint, the risks to earnings clearly lie on the upside. The shares are now trading at all time highs in absolute terms and currently stand at a FY22E PE multiple of 18.3x. This PE multiple still represents a discount to the immediate Media peer group but does represent a break-out from the historic 10x – 15x PE range that NFC has typically traded within. The key issue for investors will be the sustainability of current momentum and the implication for margins. In our view, NFC has always been a structural growth story independent of the macro cycle. We also see margins being driven by a combination of revenue mix and cost savings and see no reason why a low 20% EBIT margin cannot be achieved and maintained.