Companies that can grow Revenue mid teens for multiple periods without a glitch are quite rare. They do exist but in todays market you are paying closer to 40 x earnings to buy one and glitches or setbacks are always possible.
The other thing to consider is margins. Revenue growth is only part of the story margin expansion at the GP or NP level of the P & L can deliver more to the bottom line. The GP growth rates for the same years in RDX are as follow;
I think the biggest flag i have with RDX is its listed history is short so historical data and notes to the financial statements don't necessarily provide enough of a picture to have robust confidence in the businesses trajectory. I think it was a worthwhile bet at 20 x earnings and a 4% DY.
I am generally feeling that the multiple expansion of stocks must be drawing towards an end. Performance this year will require market surprising earnings growth rather than investors paying more for earnings. Quality is already trading at 35 - 42 x. Surely that can't expand out more?
RDX Price at posting:
$4.49 Sentiment: None Disclosure: Held
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