There has been a very positive Trading Update from FONIX this morning, which has resulted in broker FinnCap raising its target price to £2.00p.
I previously took a look here at the company, the shares then £1.09p, and I hold the shares as a long term play given the excellent growth prospects.
As I write, the shares are up 5p to £1.47p which sees the stock trading on a current PER of 21 falling to 18 next year as FinnCap has penciled in adj pre-tax profits of £8.2m for the current full year and £9.1m next year. This does not look excessive for a business in growth mode in an expanding market and which resides over a robust balance sheet.
At the present time, markets are going through in part something of mild correction, which is no bad things as a number of stocks have become toppy and a degree of caution obviously needs to be applied.
That said, if quality stocks and performers get dragged down, it presents an opportunity, so it’s clearly worth keeping close tabs on FONIX, which looks to have all the right credentials for both near and longer term appreciation as I outlined in my earlier piece.
The announcement today shows that growth has continued, with the company announcing that it is currently trading comfortably in-line with expectations.
This is the kind of wording I like to see: very reassuring without over playing things and a door left slightly ajar for upgrade potential.
Total payment volume grew by 18% to £123m as FONIX delivered with both existing and importantly new customers that included involvement in the BBC Children in Need campaign back in November.
Underlying cash generation is strong and that will support the dividend intention, which is another attraction here going forward, where the expected growth should support a progressive policy.
The FinnCap note appears on the conservative side with FONIX already achieving 52% of the current year forecast, but that of course is no bad thing. I much prefer to see a company under promise and over achieve than the reverse.
In terms of the current valuation attributed to the company, despite the shares having put on around 35% since my entry point, they remain both attractive and undervalued in comparison to wider sector peers.
I hope at some point to be able to speak with management, perhaps on results day and subsequently pen or more in-depth piece.