The FTSE 100 protective technology and equipment provider, Halma (LSE: HLMA), released its full-year numbers today. But its share price has barely moved. This, to me, is a perfect example of a stock whose results are ‘priced in’, a term we often hear in investing commentary.
I think this is a good sign, because it indicates that the company’s performance is predictable. In this case, it was predictably good, which is even better.
A robust FTSE 100 stock
Halma’s statutory pre-tax profits are up 13% and dividends per share are up 7% for the year ending 31 March 2021. Statutory numbers are those reported for government purposes. Because they use a standardised method, they are also helpful in making comparisons across companies.
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This marks another successful year for the company, even with a 2% decline in revenue. I am not worried about this decline though, because it is limited. Moreover, the pandemic impacted Halma’s first-half performance, though revenues were up in the second-half.
As I see it, the fact that it is a pricey stock, with a price-to-earnings ratio of 57 times, could be its real downside. I still think it is a good stock to hold for the long term, however. The last time I wrote about it, its P/E was 46 times. As I said then, you pay a premium for a high-quality stock, and I still would for Halma.
FTSE 250 stock with potential
In sharp contrast to Halma, the stock markets have reacted sharply to annual results from Mitie Group (LSE: MTO), also released earlier today. The FTSE 250 provider of cleaning and facilities management services has seen a 5% jump in share price.
I reckon this is because of its robust outlook for the next year. In his comment on the results, CEO Phil Bentley says that next year “will be materially ahead of our prior expectations”.
As an investor, I am particularly encouraged by the trends in contracts. At 96%, the contract renewal rate is at an all-time high. New contracts are described as both “significant” and “high quality”. Moreover, these are expected to be a reason for the company’s improved performance next year. Going by this, I am hopeful about Mitie’s future.
On the flipside, the latest numbers are not entirely strong. Its revenue grew by a robust 19% for the year ending 31 March 2021, but its operating profit is down by a huge 26% because of the pandemic. The pandemic is not yet over, so I am not ruling out some continued impact on its profits.
My takeaway for Mitie Group
Keeping in mind both the latest results and the outlook, I think the share price can rise more. It seems to have been impacted far more than what is visible in its financials. Its share price is actually down by 13% from the year before. And it is way below its pre-pandemic levels too.
It is a buy for me. But if I was being really risk averse, I would wait for another update before buying the stock.
