- EBITDA forecasts raised
- Financial strength provides scope for further investment
- Shares down 50%+ since Sept 2021 peaks
Through the fog of cost inflation, wage and recruitment pressures, macro weaknesses, and workers gradually returning to offices, communications kit designer Gamma Communications (GAMA:AIM) continues to make progress.
The AIM-listed business flagged a solid start to 2022, supporting a full year profit outlook in the top half of current analyst expectations.
That puts it on track for EBITDA (earnings before interest, tax, depreciation and amortisation) of £104 million and £110.8 million this year and next, based on Peel Hunt’s rough 6% raised estimates.
That the company is growing at all is impressive, demonstrating the urgent need of thousands of enterprises to upgrade communications equipment in today’s increasingly digital-first environment.
CONFIDENCE LOST ON INVESTORS
The board remains very positive about the prospects for Gamma, today’s pre-AGM update spelled out, and the business is in a ‘strong financial position, which enables it to continue to invest in products and market development.’
Not that you would know it. Year to date the stock is down 32% and more than 50% off September 2021 highs, struggling to gain much traction even after today’s encouraging update, with the shares only moving 1.6% higher to £11.38.
The stock has been pulled sharply lower in recent months as investors rotated out of growth companies, particularly things even vaguely connected to the technology space.
It leaves Gamma on 10-times 2022 EBITDA, ‘only a tad higher than the seven to 8.5-times of quoted peers Adept Technology (ADT:AIM), Maintel (MAI:AIM) and Redcentric (RCN:AIM) despite a stronger organic growth outlook, and similar to the 10-times recently paid by Daisy for similarly lower growth XLN,’ said Megabuyte analyst Philip Carse.