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Stockwatch: A momentum play linked to industry rationalisation

Published Fri, 08 Jun 2018 11:05:43 on Interactive Investor

Do bumper interims from this AIM-listed financial planner/wealth manager AFH Financial Group (AFHP) consolidating smaller advisory firms, imply further upside?
Or trading on 32 times earnings for its year to end-October 2017, with market price at 345p, is its stock rating now high-risk?
After listing four years ago, the price traded sideways at around 150p, then doubled in 2017 and hit 360p earlier this year. It dipped back near 300p but has strengthened again on latest results.
A dividend yield barely over 1% makes plain,"support" is all about growth numbers and narrative: optimists will see plenty more scope for a £130 million group to rationalise a fragmented industry of owner-managed firms, while pessimists be wary the growth rate will eventually ease or a general downturn hurt sentiment towards financial stocks.
But it looks fair to assume more years of expansion ahead, thus, for AFH to keep growing into its rating.

Source: interactive investor Past performance is not a guide to future performance
Interim results reflect strong all-round progress
In the six months to end-April, acquisitions have helped boost pre-tax profit 132% to £4.3 million in the six months, where I add back depreciation/amortisation but not share-based payments (like the company does) as they are ultimately a cost.
Normalised earnings per share (EPS) thus rise 52.5% to 9p versus 62% to 10p as proclaimed in the results' highlights.
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