Latest news with #Xaar
Telegraph
3 days ago
- Business
- Telegraph
Work is under way to turn this firm around – optimists could cash in
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest. Micro-cap stocks are not for everyone and risk-intolerant investors can look away now, especially if they remember this column's past misadventures in this area with stocks such as Xaar (XAR), the now-renamed Chesterfield Special Cylinders (CSC:AIM), or Pressure Technologies, as was, and the now-delisted Zytronic. But one of our more successful forays here was wallpaper-to-fabrics group Sanderson Design (SDG:AIM), where we more than doubled our money and then took profits north of 200p. A subsequent lengthy slide in the share price catches our eye, not least as it leaves the stock trading very cheaply indeed relative to current net assets, let alone any earnings figure that represents anything like a return to form for the company. Once known as Walker Greenbank, Sanderson Design has a rich heritage and strong brands, which include Zoffany, Harlequin, Sanderson and Morris & Co, but the last three years have been ones to forget for the Chiswick-headquartered company. Weak consumer confidence has dampened sales across its brand, manufacturing and licensing activities, while the company has invested heavily in digital marketing and production. Last year's £16.3m write-down of intangible assets relating to 2016's purchase of Clarke & Clarke took Sanderson into the red on a statutory basis and the dividend was cut. Throw in April's tariff scares, thanks to President Trump's 'Liberation Day' trade agenda, and during spring, the share price hit lows not seen since Covid-19 was doing its worst in early 2020, and before that in 2010. Chair Dianne Thompson and chief executive, Lisa Montague, are working on a cost-cutting programme, driven by an efficiency drive called Future Factory, where digitisation has a key role. Efforts to enhance sales in the US could yet bear fruit, even if the impact of tariffs must still be closely monitored, and the power of the company's brands can be seen in the licensing income they generate through agreements such as those struck with Next and Sainsbury's. In the meantime, Sanderson ended its last financial year in January with £5.8m in cash and no debt. Adjust that figure for a pension surplus and lease liabilities, and net borrowing is limited, so there is no clock ticking away in the background, and this month's trading statement reveals the cash pile is now £7.5m. The lowly valuation attributed to the company further protects the downside. The stock market capitalisation of £36m compares to tangible net assets on the balance sheet as of the January year-end of £57.5m, or just under 80p a share. If momentums return to the business – and it does remain an 'if' – that level is the very least we would expect of the share price. This is also a business that has been capable of making £5m to £8m in net profit in solid years and more than £10m in really good ones, such as 2018. The £36m market valuation looks low against such figures, and any return to those levels would put the shares on a single-digit price-to-earnings multiple. We must be aware of the risks posed by the mixed, if not downright confusing, macroeconomic backdrop, and how it is never as easy as it looks to really crack the US market – even if management believes it can be done. Moreover, any brave buyer of the shares will need a positive catalyst of some kind to persuade others to start thinking their way. The trading update was far from strong, as it flagged a 4pc drop in sales for the first six months of the financial year to January 2026. However, licensing income was strong, brand revenues showed some signs of stabilisation, and the cost cuts were sufficient to prompt management to reiterate their belief that it would improve to a break-even result this time around, after last year's loss. In sum, the Board did not have to disgorge a profit warning. Sometimes all it takes with heavily beaten down stocks is for the rate of decline in sales and profits to slow, especially if management is acting and the balance sheet offers support, as seems to be the case here. Investors then start to think that if a bottom may be in sight, then things will stop getting worse, and that if things stop getting worse, then they may soon get better. Such a thought process, backed up in time by improved profits and cash flow, could just be the catalyst that patient contrarians will seek as they do their research and weigh up the chances of a recovery in Sanderson Design's shares. We now wait to see the first-half results on October 15.
Yahoo
19-05-2025
- Business
- Yahoo
Investing in Xaar (LON:XAR) five years ago would have delivered you a 66% gain
Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Xaar plc (LON:XAR) share price is up 66% in the last 5 years, clearly besting the market return of around 29% (ignoring dividends). Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business. We've discovered 1 warning sign about Xaar. View them for free. Xaar wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth. In the last 5 years Xaar saw its revenue grow at 8.0% per year. That's a pretty good long term growth rate. Revenue has been growing at a reasonable clip, so it's debatable whether the share price growth of 11% full reflects the underlying business growth. The key question is whether revenue growth will slow down, and if so, how quickly. There's no doubt that it can be difficult to value pre-profit companies. The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail). Take a more thorough look at Xaar's financial health with this free report on its balance sheet. Xaar shareholders are down 14% for the year, but the market itself is up 4.8%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 11% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 1 warning sign for Xaar that you should be aware of. If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation). Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
