Niche positioning in a number of specialist markets is key to margin growth at logistics specialist DX Group (DX.:AIM). Offering a diverse range of logistics services in areas such as pharmaceuticals, optical, legal and outsize parcels differentiates DX in a space where many peers are overly focused on the more commoditised parcels and letters segments.

This approach not only helps reduce bruising competition with larger players but expertise in more specialist fields should also help DX to target markets where service quality is the key requirement rather than cost alone.

The £176.3 million cap is also a cash-generative and well-invested business. Andy Hanson at Zeus Capital points out that ‘net debt at the year-end was £1.8 million a material improvement on the £12.2 million at the end of full year 2014 and, once again, an improvement on the £3.2 million forecast. The strong cash generation is allowing a material investment into the business with a c. £9 - £10 million capex investment between full years 2015 and 2017 to improve the service offering.’

DX has recovered significantly since full year results on 21 September but remains at a discount to peers. At 88p consensus forecasts imply a 2016 yield of 6.95%.