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Filta Group – argues “strong trading”, but how strong? Enough to suggest a buy?

By Steve Moore | Friday 10 August 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.

November 2016-listed Filta Group (FLTA) has updated including that it “has enjoyed strong trading in the first half of the year” and “confidence for further progress in the second half of the year and beyond”. What do those mean in financial terms - and against a currently little-changed-on-the-announcement circa 230p share price?

The “strong trading” from this fryer and commercial kitchen-related services company is added to though only be “in line with management expectations”. It would then have been helpful for the company to include what those are!

With it not doing so, I note house broker, Cenkos, on the back of the company's 2017 results was looking for earnings per share of 7.7p for the current full-year (an adjusted pre-tax profit of £2.6 million), rising to 9.4p next year. This year-end net cash was forecast at £4.4 million.

However, those compare with the shares already having risen from an 83p listing price to the current circa 230p – now capitalising the company at more than £62 million. This is thus an AIM listing in contrast to the usual AIM IPO roll-call of shame – and has delivered quite consistently for shareholders so far. However, the valuation now looks to significantly reflect that, with precious little Benjamin Graham ‘margin of safety’ (“for absorbing the effect of miscalculations or worse than average luck”).

Possibly one for the watchlist for a better entry level, but currently, with the potential reward v. risk trade-off looking heavily tilted to the latter, one I avoid.

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