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Interquest results more than decent - buy

By Tom Winnifrith & Steve Moore | Thursday 10 March 2016

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Specialist recruiter InterQuest Group (ITQ) has announced results for the 2015 calendar year and that “the new financial year has started positively”. Good News.

This is with the results from the specialist technology recruitment company with a focus on high-value niche markets showing an adjusted pre-tax profit of £5.01 million, generating earnings per share of 10.50p, up from 9.58p in 2014.

After particularly £1.56 million on acquisitions and £1.09 million of dividends paid, net debt was reduced by £2.33 million to £6 million. A further dividend per share of 2p has been announced, to be paid on 13th May, with an ex-dividend date of 14thApril, taking the payout up to 3p (2014: 2.5p).

The company added that “we are witnessing acute skill shortages for technologies that will enable our clients to either augment or transform their operating model to capitalise on the new digital economy. This demand is having an upward impact on salaries as well as permanent and contract recruitment margins”.

This sees house broker to the company, Panmure Gordon, note that although “the new InterQuest management team has inherited an efficiently run business… given the verticals targeted, fee income growth trends should have been higher (+6.2% YoY 1H15, -1.2% 2H15). The new strategy aims to address the top-line through improved consultant retention and headcount investment”. It is forecasting earnings per share to grow towards 12p this year and to 13.5p next.

The reported performance has seen the shares slip towards 80p – suggesting a price earnings multiple of circa 6.8x, falling to circa 6x. Given the noted outlook, progressive dividend and reducing debt, this looks a much too harsh assessment and we continue to rate this Steve Moore tip of the year  a value buy.

This article first appeared on the Nifty Fifty website which Lucian Miers runs with Tom Winnifrith & Steve Moore - sorry, it is paying customers first. To access the website ahead of the next share tip from Tom & Steve and a new shorting idea from Lucian shortly GO HERE

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  1. Perhaps it may be helpful if you gave a target share price? Thanks

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