Fisher (james) & Sons Share Discussion Threads

[roddiemac2] 19/5/2017 12:23

Rigidly adhering to the use of traditional ratios can be a very good guide to " value", but might preclude an awareness of other factors: ie the huge potential growth in some of the markets they operates in : good diversification, both geographical and by product or service offered: great ten year record.

Hardly surprising that holders over 3% total about 60%, and some have held for many years.

[phillis] 19/5/2017 09:19

yes
I would be tempted at below £12 all other things being equal
My issue - as a potential investor - is about valuation
Try

"The formula for the PEG ratio is:

PEG Ratio = Price-to-Earnings (P/E) Ratio / Annual Earnings Per Share Growth

The PEG ratio uses the basic format of the P/E ratio for a numerator and then divides by the potential growth for the stock. The two ratios may seem to be very similar but you can see the obvious difference with a calculation.

Let us take Company XYZ stock. Say XYZ is currently trading with a P/E ratio of 30. Typically, this would be considered an "expensive" stock. But let's also assume analysts forecast growth in earnings per share of +40% for the next year.

In this case, XYZ's PEG ratio would be:

PEG Ratio = 30 (P/E ratio) / +40% (earnings growth) = 0.75

A rule of thumb is that any PEG ratio below 1.0 is considered to be a good value. So even though XYZ is highly valued based on the P/E ratio, the PEG ratio says that it is undervalued relative to its growth potential.

[illiswilgig] 18/5/2017 22:40

'NB
the write back of the contingent considerations is evidence that sales expectations on the acquisition(s) are not being met'

I do see where you are coming from. But from where I am standing that's a very one sided viewpoint.

I agree it is evidence that the vendors sales expectations are not being met. It says little or nothing of the buyers expectations.

It also says little or nothing about when the sales expectations will or will not be met. They may be 6 months late or never to be met. Who knows?

Missing the vendors high expectations is not necessarily a problem, thats how earnouts work, and may in the long term mean that FSJ got a better deal.

But then again it may not.

Second guessing the management has little value for me. I invested at 75p in 2001 or thereabouts orginally. It's a stonking investment for me and I will be holding unless there is some evidence that the management has lost the plot and I don't see that yet. Below £12 I'd be adding more, but I doubt that I will have the pleasure,

cheers

[emeraldzebra] 18/5/2017 12:30

Phillis. i think you are 'over analysing' FSJ. My very amateurish advice : Buy the fu+k out of it and forget it. Just before you reckon you will snuff it, look at the share price and i am sure you will be v pleasantly surprised. And the grand children - v pleased too.

[phillis] 18/5/2017 11:24

in the 14s as best I recall. I traded a bit at the end on the ups and downs
felt it was fully valued then!

How is this relevant? ( I only once ever sold at the top!)

Not sure what an umbrella organisation is
Have never come across one before neither as investor or CEO

NB
the write back of the contingent considerations is evidence that sales expectations on the acquisition(s) are not being met

[roddiemac2] 17/5/2017 11:45

There is absolutely no comparison to be made between FSJ and RPC. It is daft to do so. FSJ is what I call an umbrella organisation . Many of the areas they operate in are in the early stages of development; companies acquired are often small, being themselves in the early stages of development. FSJ is effectively a nursery for the companies acquired.

What was the share price of FSJ when you last sold ?

[phillis] 16/5/2017 13:08

Boule
I dont know anything about carpets but I have a very profitable position in RPC
This however has an amber light waiting for trading progress
I may exit
At least RPC has a more coherent business model, whose acquisitions are large enough and connected enough to provide large synergies and economies of scale - unlike the scale of Fisher's buys

[phillis] 16/5/2017 13:05

ragbag = a miscellaneous collection of things

Is it not?

Look my initial premise was that this is a highly valued business the retained earnings of which have not changed for the 4 years shown on ADVFN financials page (it might be more - I didnt check) DESPITE THE REGULAR FLOW OF ACQUISTIONS

in other words focus on the real performance and not on what management want to concentrate on i.e underlying performance

EDIT
Make that 5 years

[bouleversee] 16/5/2017 12:53

I should have said "a bit like Phillis's view of Fisher)

[bouleversee] 16/5/2017 12:50

Fisher is almost a l7 bagger for me which will do nicely. I have never sold any but have given some to 2 children and 4 grandchildren and still have a decent holding. I bought them after reading one of John Lee's article in the FT.

I wonder how Phillis (or anyone else) would rate them against, say, RPC and Victoria (carpets and floorcoverings, not oil) who also make lots of acquisitions. The share price of both (which I also hold) has done well (Victoria's positively meteoric since Wilding took the helm) but RPC has floundered a bit of late because Elliott thinks they have been overdoing the buys, a bit like your view of Fisher. I don't feel competent to judge. However, I should have thought there was some merit in having a diversification of activity rather than having all your eggs in one basket, especially the oil industry which is still in a state of flux, hopefully on the up again now but for how long? The common denominator is specialist engineering and the ragbag seems like a good move to me, using their expertise in as many fields as they can competently manage, which should even out the peaks and troughs which have happened in the past.

Phillis said: " In the last 2 years FSJ have added back to retained earnings £12m of contingent consideration". I would appreciate an explanation of what this means, unless it means reserving for things they think might go wrong. If it does, is there anything wrong with that? Surely better than paying everything out in large divs. and then having to cut/axe and see a huge drop in share price a la Cobham, Interserve and various others I also hold. The div. they are paying is still a good return on my original investment. Steady as she goes and chacun a son gout.

[roddiemac2] 16/5/2017 12:11

"This seem to me to be leading to a ragbag of specialist engineering businesses whose only common denominator is water"---A frivolous and irrelevant statement. As a long term investor you have clearly missed out on capital gains, but why else the obsession with a company you no longer hold? You may or may not get the chance to buy at lower prices , but if you honestly think the above , why bother ?

[phillis] 16/5/2017 10:26

hi Illis
to continue
I too am a long term investor for my family
I do not short

It seems to me that FSJ is fairly typical of the acquisition led companies we used to see a lot of in the 80s and 90s
Small family run business are bought with ritzy potential earnouts
This seem to me to be leading to a ragbag of specialist engineering businesses whose only common denominator is water
they are profitable when bought but dont increase the combined annual profits of the parent - forget underlying factor adjustments
In the last 2 years FSJ have added back to retained earnings £12m of contingent consideration

I could go on
But good luck with your holding anyway.The share price is holding up well

[illiswilgig] 15/5/2017 20:20

Phillis,

I don't dispute FSJ has a relatively high P/E - though not as high as the two firms you mentioned so I'd not expect forecast growth to be as high either.

But I am more interested in whether growth will exceed forecast in the next 2 years. That's where the return will come from and the company has a longterm history of exceeding expectations.

I don't know why you are focusing upon the acquisitions - most of which are either assets of liquidated oil and gas companies or startups in the renewables area - and too small to make an immediate impact upon the companies bottom line.

There is no mystery why growth over the last few years has been lower. The offshore oil division suffered alongside all other oil support companies.

Last year it's underlying operating profits fell by 10% whilst the other divisions grew underlying operating profits by 20%.

The offshore oil division is now a much smaller part of the company.

Stabilisation of this division will allow the other divisions to drive the growth of the company at a higher rate. Eventual return to growth of this division, albeit from a smaller base, will provide further upside.

I expect the forecast growth in profits of around 8% is about right for 2017 and a P/E of 19 is generous.

Forecast of similar growth in 2018 and a P/E of around 18.4 seems about right to me. But is the forecast right?

Longterm performance of the company and the 20% growth across the divisions excluding offshore oil last year makes this look a bit too conservative to me.

I expect upwards revisions of the 2018 forecast - but if I could tell you when, I'd also expect to be a lot more wealthy :-)

If I see that upside disappearing then I will change my mind and start to sell, but at the moment I see it as the most likely outcome and longterm risk to the downside as small.

I am a longterm investor and I don't tend to trade stocks so I would expect my view to differ from yours?

cheers

[roddiemac2] 15/5/2017 19:32

The long term strategy means that acquisitions may take a while before contributing ; some may need considerable investment.

[phillis] 15/5/2017 15:09

regular divis are great but high p/e s require significant profit growth - actual and potential
FSJ profit growth has been pedestrian in recent years when it has made a lot of acquisitions
Some of them clearly aren't contributing much to the profit pool

[roddiemac2] 15/5/2017 12:50

Phillis ,

In a rapidly changing world , there are very few companies that show serious long term potential . I still think FSJ is one ; having held for 15 years, I will continue to hold. As illiswilgig correctly points out , FSJ could surprise on the upside at any time ; trying to predict exactly when that would be is pointless. In the meantime , dividend growth means I receive good returns on my purchases at much lower prices. I am not alone in thinking this may be a share to hold for life.

[phillis] 15/5/2017 12:15

OK
the point about high P/Es is that you (certainly I) need high rates of profit growth year on year - something Fisher does not have
No material growth in eps over 4 years despite all the acquisitions

Each to his own!

[illiswilgig] 15/5/2017 10:01

Phillis,

thank you for your pointers. I've had a look at both DPH and ABC and they are interesting companies. I've added them to my watch list, though with P/E's of 27 and 34 respectively they are valued much more highly already than FSJ at 19. I don't have enough knowledge of the companies yet to know how likely they are to have more risk to upside than downside nor have I yet studied the accounts which as a LTBH investor is something I have to do.

I understand your target of £14 and wish you luck. I last bought FSJ when it dropped to around £10 and would/will not be adding more unless there is a significant drop but am happy to hold as I perceive current expectations for 2018 are conservative and I expect them to raise this at some point within the next 12 months - but as usual with FSJ it could happen any time.

cheers

[phillis] 09/5/2017 19:15

Intermittently
Too expensive at the moment but all things being equal I am a buyer in the 14s
Try DPH if you really want a high p/E AND profit growth
Or even ABC

[roddiemac2] 09/5/2017 18:29

Phillis,

They have stated that trading is in line with management`s expectations, and that growth ( like last year ) will be weighted to the second half. I see no reason to doubt that expectation. In answer to your question, I suspect neither . Management`s acquisition strategy is steadily laying the foundations for future growth . Investment in acquired companies will not always reap immediate benefits.

There were some sizeable trades north of 1700p in the third week of April; evidence that someone sees the long term potential.

Are you a shareholder?

[phillis] 09/5/2017 15:30

I see the filtered Q-ra-P is posting here ,no doubt trolling again

peculiar grammar RM!

EDIT
RM
Given the high rating and the regular and numerous acqusitions, yes I was expecting an improvement
Like for like profit has obviously gone down
Question is, is it the new businesses that havent performed or are they hiding a downturn in the older ones?

[roddiemac2] 08/5/2017 13:38

QuePassa,

!!--Phillis es mejor ignorado

[roddiemac2] 08/5/2017 13:34

Phillis ,

Were you expecting an improvement?

[bouleversee] 05/5/2017 15:38

Recommended in The Times today.