I have some history with UK Mail PLC, having bought shares in the company in October 2011 and sold them one year later, for a 33.7% total return.
I thought it was a solid – if unexciting – business that was well worth investing in at the right price. Having sold in October 2012 for 262.5p the shares then went crazy, shooting all the way up to and beyond 700p.
The share price has now come back down to 500p and with UK Mail’s improving results I think the company looks reasonably priced once again.
500p may well be twice the level I sold them at two and a half years ago, but when the facts change (UK Mail’s revenues, earnings and dividends have all grown) my calculation of “fair value” changes as well.
Here’s how UK Mail measures up:
- Medium growth: 10-year growth rate of 5.4% (the FTSE 100 managed just 1%)
- Medium consistency: Raised revenues, earnings or dividends 67% of the time over the last 10 years (54% for the FTSE 100)
- High profitability: Average post-tax return on capital employed of 18% (about 10% for the FTSE 100)
- Low debt: Total borrowings are less than 5-year average post-tax profits
- High capital expenses: Capex over the last 10 years has been greater than earnings
- High yield: Dividend yield of 4.3% at 500p (3.7% for the FTSE 100 at 6,500)
The rest of this article was originally published on the Bull Bearings website, which is no longer with us.