The closer you look at the financials the less impressive it...

The closer you look at the financials the less impressive it looks as a 'growth stock'. Depends on the way that you wish to calculate the pe - after the interim (1st half this year report) I like to use the 2nd half last year eps plus the 1st half eps this year rather than the total eps for last year. There are a number of reasons for this that are too many to detail here but consider the factoring in of the number of shares on issue changing as is a big factor for CRU that has diluted existing shareholders considerably over the past year then this is the best approach (other reasons too).

Anyway - prior to the announcement it was trading on a pe of around 10 to 11 based on a pe calculated on eps of 2nd half last year + first half this year - this totalled approx 2.92cps + 3.17cps giving a total eps for post interim (pre annual just released) of 6.09.

What this means is that the market has a 'current' eps of 6.09 for the pe calculation. After the annual results were released on Friday the eps as quoted by the company was only 6.21 - hardly a big upside surprise.

The stock however could have been considered undervalued anyway based on the pe prior to annual results being just over 10 when its industry average was around 18.

The point I make is that it was undervalued prior to the announcement and the full year results highlighted the fact - but the result itself was not that great as at 6.21 cps for the eps meant that the second half only produced an eps of approx 3.04 cps which is not much more than last year of approx 2.92 cps.

You might then ask why the after tax profit was up 73% when eps year on year went only from 5 to 6.21 (23% growth) - the reason is more shares being issued.

At the December 2002 interim the number of shares on issue was only approx 26.5 million, at June 2003 annual this was approx 30.5 million and now after June 2004 annual is approx 38 Million shares - quite a dilution.

It is fine for them to highlight the profit dollars going up 73% but this would be a much better result if the eps went up 73% too which it would have if dilution didn't occur - it didn't and that is worth noting. After recent rally pe is now around 14 and peg around 0.6.

Anyway, still a great dividend and special dividend promised so a good yield on offer and after recent rally pe is now around 14 (industry average 18) and peg around 0.6. Maybe further upside based on that rather than a true 'growth stock' - also as they point out other revenus streams not contributing full year that may add to profits - but that remains to be seen what the profit margins are in these areas that were not up and running for the full year.

good luck