Our Investment View
This is an extract from our research report last week:
We consider that the recent share price weakness presents an excellent entry opportunity into the stock, given the excellent fundamentals. The current P/E ratio of 22x (having traded in the mid-to-high 20s) appears reasonable given that the Company has a market-leading position, significant barriers to entry, high margins, a long history of stable revenue and earnings growth and consistently high levels of ROE (~17% for FY15).
Further, EBITDA growth (and EPS growth) in FY15 and FY16 are expected to outstrip forecast revenue growth over the same period, underpinning the strong leverage in the Company’s earnings to increasing revenues.
Our Charting View
Since peaking in March, you will notice that VED has had a rough time, dropping over 20%. It looked oversold in early June but it struggled to bounce higher, finding lower levels in July. It bounced impressively last week and we could be seeing the beginning of a recovery. It is early days, so more conservative investors would like to at least see a “higher high” which means we need to see it up at $2.10 to be comfortable that the trend is turning.
