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Shares in bathroom fit-out specialist Norcros (NXR) look cheap despite the company delivering an eighth consecutive year of revenue growth in the 12 months to 31 March 2017.

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At 173p, the shares trade on 6.1 times stockbroker Numis’ forecast earnings per share (EPS) of 28.5p for the year to March 2018. They also offer a prospective yield of 4.5%. The expected dividend payment is covered just over 3.6 times by forecast EPS, which is a very healthy ratio.

The discounted valuation suggests the market believes earnings forecasts cannot be achieved in the current macro-economic environment as well as concern about pension liabilities.

Chief executive Nick Kelsall tells Shares managing the pension liability, which fell from £97.8m to £62.7m in the second half of the latest financial year, does not impede day-to-day running of the business.

He is reassuring about management’s ability to achieve growth even in uncertain times as the company tries to increase market share.

Norcros’ best-known brand is probably the Triton range of showers. It is focused on the UK and South Africa. The South African operation, which Kelsall says was once a ‘problem child’ for the group, delivered 8% revenue growth at constant currency in the year to 31 March 2017.

The stock is attractively valued. Numis has a price targt of 300p. Implying nearly 75% upside for investors over the next year.



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