I think its a result best described as workman-like. Lots of...

I think its a result best described as workman-like.

Lots of bits moving in various directions - cycling initial Covid onset trading conditions, supply chain constraints pushing down margins and increasing investment in inventory, the acquisition in February 2021 of Australian Clutch Services, and the Davey pump business under-earning signficantly - making it difficult to be able to discern whether it is a good result or not.

While understandable under the circumstances, management not offering any opinion on outlook is unlikely to endear the market to the stock.

But I don't think GUD will be alone in not wanting to provide earnings guidance for FY2022; I suspect strongly that boards not wanting to give guidance is going to be one of the overarching themes of the current reporting season.

Of course, that same uncertainty is something which will feed into the expectations of vendors thinking of selling their businesses. Which, in theory, plays into the strategies of companies that seek to grow by acquisition.

But until GUD makes its next acquisition, I don't expect the stock to do very much in terms of outperforming the market.

At the same time, assuming 6% to 8% earnings growth in FY2022, that suggests a prospective P/E of 15x and EV/EBIT of around 11x, which is not expensive in the context of general market valuations, so there is probably not much downside to the share price, either.

In summary, I 'd say that it was a 5 out of 10 quality result from 6 out of 10 quality company which is being appropriately valued like a 6 out 10 company.

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