Van Elle Holdings plc (LON:VANL) And The Capital Goods Sector Outlook 2018
Van Elle Holdings plc (AIM:VANL), a £70.80M small-cap, operates in the engineering and construction (E&C) industry, which is expected to benefit from significant infrastructure plans and public-private partnerships to fund them. Capital goods analysts are forecasting for the entire industry, a strong double-digit growth of 10.81% in the upcoming year , and a strong near-term growth of 22.30% over the next couple of years. This rate is larger than the growth rate of the UK stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether Van Elle Holdings is a laggard or leader relative to its capital goods peers. View our latest analysis for Van Elle Holdings
What’s the catalyst for Van Elle Holdings’s sector growth?
The E&C industry in the UK faces growing competition from players in China, Korea and India. Firms in rapidly growing economies have spent the past decade focusing on their home markets, gradually building up cash positions and internal expertise. Now, as growth eases in their home markets, they are expanding outward and seeking to compete against established global players. Over the past year, the industry saw growth in the teens, beating the UK market growth of 11.55%. Van Elle Holdings lags the pack with its negative growth rate of -18.87% over the past year, which indicates the company will be growing at a slower pace than its E&C peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 13.41% in the upcoming year.
Is Van Elle Holdings and the sector relatively cheap?
The E&C industry is trading at a PE ratio of 14.1x, in-line with the UK stock market PE of 18.5x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 16.63% compared to the market’s 12.77%, potentially illustrative of past tailwinds. On the stock-level, Van Elle Holdings is trading at a lower PE ratio of 9x, making it cheaper than the average E&C stock. In terms of returns, Van Elle Holdings generated 25.77% in the past year, which is 9.14% over the E&C sector.
Next Steps:
Van Elle Holdings’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. In addition to this, its PE is below its E&C peers, suggesting it is also trading at a relatively cheaper price. Perhaps the market hasn’t fully accounted for the growth, meaning now may be the right time to accumulate more of, or enter into, the stock. However, before you make a decision on the stock, I suggest you look at Van Elle Holdings’s fundamentals in order to build a holistic investment thesis.
1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
2. Historical Track Record: What has VANL’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Van Elle Holdings? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
