SXS

Spectris (SXS) 786.5p

The supplier of precision instruments and control systems, used in many industries, posted strong results last week (22 February) which helped to restore confidence in good quality businesses, against the general gloomy sentiment. Constant currency revenue grew 6.5%, ahead of the company’s earlier guidance and adjusted profit before tax came in at £98 million, 28% up from the previous year due to strong operating margins. The shares have already gained 21% since when they bottomed in January at 645p but they still have way to go. Last summer’s high at 920p is some way ahead but the company is rock solid and the market has started to realise it. Graham Neale, head of equities at Killik & Co says there is potential for expansion of the company’s margins, and points out that it trades on a less than 12 times December 2009 forecast EPS. Consensus upgrades are on the cards and the shares look undervalued, so buy at this level and hold on to the shares with a relatively wide stop loss.

ACTION: BUY Spectris • Target 865p • Stop Loss 731p

TIME TARGET: 6 WEEKS