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Warpaint London – 2017 ‘performed well’, 2018 “has started well”… but growth value?

By Steve Moore | Wednesday 7 February 2018

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 supplier of colour cosmetics and owner of the W7 brand, Warpaint London (W7L) “is pleased” to update that it “continued to perform well during 2017 and the board confirms that it expects to report results in line with management expectations for the financial year” and that “2018 has started well and we look forward to the future with confidence”. But what are the expectations – and how do they compare to a current just over 200p share price?

Firstly, it would have been useful for the company to also include in the announcement what the expectations are! I have though seen “forecasts/illustrative projections” from house broker Stockdale. These are for earnings per share up from a prior year 8.6p to more than 10p, rising to above 13p for the now current year.

These were boosted by a November acquisition of Retra Holdings – from 9.4p and 11.9p respectively. On this, the trading statement updates; “the integration of Retra… has been completed and the Retra business is performing well. A new managing director and finance director for Retra were appointed in December 2017 to drive this business forward and… we are already seeing new opportunities and synergies”. Stockdale adds;

“Warpaint had already identified that Gifting was a growth area for its business and had substantially increased the number of SKUs in this area for 2017. Retra further significantly increases its exposure to Gifting and we should hear how the all-important Q1 orders have gone by the time of the results in late April 2018”.

The earnings multiple currently does not look cheap, but strong growth projections have it falling significantly going forward to suggest there potentially interesting value here. Of course, the company now needs to deliver on these – though “2018 has started well” is a good start and I’ll review the greater detail of the results statement with interest. On the watchlist.

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