PUNT OF THE WEEK: Demand for lightweight foam-sheet materials boosts Zotefoams
What is it?
Makes extremely lightweight foam-sheet materials for a range of applications, including aviation, transporting goods, padding for shoes and cover for prosthetic limbs.
Its customers include Toyota, Boeing, Nasa and Nike.
Zotefoams customers include Toyota, Boeing, Nasa and Nike
What’s the latest?
Zotefoams’ products are in demand and sales are soaring. It is trying to add more capacity at US, UK and Polish sites.
A £20.6million fundraising last May means the balance sheet has relatively little gearing.
Operating income covers interest payments more than ten-fold.
Who backs it?
Leading shareholders include Miton, Schroders and Blackrock, which own around a third of the shares between them.
Why you should invest
Even allowing for the costs of the capacity expansion, it has had a streak of annual profit increases dating back to 2013 and a string of dividend hikes that runs to almost a decade.
And why you shouldn’t
The biggest risk is still probably posed by the valuation.
A market capitalisation of £28million compares to forecast pre-tax profits of £10million for 2018 and the dividend yield is barely 1 per cent.
Popular shares: ASOS
By Laith Khalaf, senior analyst, Hargreaves Lansdown
ASOS targets millennials, so it should be in a sweet spot right now. But its share price has halved in the past few months after a shock profit warning in December.
The online fashion retailer had to downgrade its sales growth target to 15pc as a result of poor trading at the back end of last year.
High Street retailers would give their eye teeth for such a big jump in the top line, but the market had come to expect 25 per cent sales growth a year from Asos. That became baked into the share price, and so when the bad news was announced the fall from grace was that much harder.
Weaker consumer confidence was largely to blame, though not so much on these shores – UK sales actually held up pretty well. The real damage was done in the international business.
Asos has shown it is adept at connecting with customers through social media, and its tiny share of the vast global clothing market gives it plenty of room to grow.
That will require investment, though, so investors do need to be patient.