Stadium is added to the ‘buy’ list based on attractive earnings growth forecasts

Graham Spooner, investment research analyst at The Share Centre, explains why Stadium has been added to the ‘buy’ list.

“Stadium is a provider of niche electronic technologies and manufacturing services to original equipment manufacturers in a variety of markets. The group has been added to our ‘buy’ list as the group changes its focus in order to become a leading provider of niche integrated electronic technologies, with capabilities to design and manufacture for specific customer needs.

“Interim results in September reported a rise in pre-tax profit to £799,000, regardless of a small decline in revenue to £19.8m. Management expect a stronger second half and this confidence was reflected in a 55% increase in the dividend to 0.7 pence.

“Despite recent strength in the share price, the prospective 2015 p/e ratio is around 11.3, falling to 8.5 for 2016. If the growth forecasts can be achieved, then a 2015 PEG ratio of 0.2 adds to the attractions. Furthermore there is a progressive dividend policy, which is not always the case for an AIM company, with a forecast yield for 2015 of 2.2%.

“We recommend Stadium as a ‘buy’ for high risk investors. The company’s objective is to grow through gaining market share with new business, whilst also maintaining the level of activity in those core areas which have a mature base of established customers. Following the recent rise in the share price, investors are advised to drip feed into the shares by building a holding over time.”