A statement was released by the firm to say that it is in advanced discussions regarding a possible all cash offer by Temenos. Under the terms, shareholders in Fidessa would receive £35.67 in cash for each share, plus the right to receive the final and special dividends announced by the company yesterday. In aggregate, they are worth £0.797 per share, which brings the total value of the possible offer to £36.467 per share.

Investment potential

Of course, there is no guarantee that a firm offer will be made for the stock. This may be why the company is trading slightly below the total offer value, with its price standing at around £35.50.

The offer appears to be relatively generous. It puts Fidessa on a price-to-earnings (P/E) ratio of around 36. This is relatively high, given that the company is forecast to grow its bottom line by just 4% this year and by a further 3% next year.

Certainly, it has the potential to generate higher growth rates in future years. Demand for its services continues to rise, and this could provide a boost to its overall growth rate. However, with it trading on a high valuation even before today’s announcement, it seems as though its investors would be getting a good deal if the offer comes to fruition.

Clearly, some investors may wish to cash in following the sharp rise in its share price. A bid may not be made, after all. Either way, it appears as though the stock lacks investment appeal at its current price and it may be prudent to sell up and invest elsewhere.

High valuation

Also offering a narrow margin of safety within the software and computer services sector is Computacenter (LSE: CCC). The company’s share price has risen by 40% during the course of the last year. This puts it on a P/E ratio of around 16.5. On its own, its rating is not prohibitively high. However, when the company’s forecasts are factored-in, its valuation seems difficult to justify.

In the current year, the business is expected to report a rise in earnings of just 3%, followed by the same rate of growth next year. This is around half the expected growth rate of the wider index and suggests that investors have become overly optimistic about the company’s prospects.

Certainly, Computacenter has a solid track record of earnings growth. It has been consistent in recent years, with its bottom line growing in four out of the last five. However, it is still priced as a growth stock, and its forecasts over the next couple of years indicate that it no longer fits into that category. As such, now could be the right time to avoid it and look elsewhere for better options.

The post Should you snap up Fidessa Group plc after 20% rise on possible bid? appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any share mentioned. The Motley Fool UK has recommended Fidessa. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Indeed, here are two stocks that I believe have all the hallmarks of retirement dividend champions. 

Profiting from data 

Fidessa (LSE: FDSA) provides software and services, such as trading and investment management systems, analytics and market data to the financial services industry. This is a business that’s difficult to disrupt, and companies like Fidessa have to spend years building a name for themselves and reputation for quality. 

All that time and investment pays off over time. Its leading position has helped it grow revenues by 25% over the past five years. Management believes that the company is well placed to expand further in the years ahead.

A trading update published today noted: “Fidessa believes that it is entering a period where opportunity is returning. [It] expects this opportunity to arise both from customers developing their businesses in response to market changes and also as a result of other vendors struggling with the scale needed to operate successfully in the increasingly complex environment.“

The group’s leading position is excellent news for income investors. It’s unlikely that smaller upstarts will disrupt the firm, and as it grabs more market share, it’s going to be even harder for competitors to impinge on growth. 

Cash cow

Fidessa’s market position is allowing it to pursue an aggressive dividend policy. This year analysts expect the company to return 100% of earnings to investors via dividends, giving a dividend yield of 4.2%. 

At the end of the first half, the group reported £71m in cash, enough to support the dividend for two years based on 2016’s numbers. 

So overall, from a dividend perspective, it looks to me to be a great buy-and-forget investment. 

Building for the future 

In my opinion, the best dividend stocks are businesses built for the long run, just like Aviva (LSE: AV). 

As a manager of pensions and savings, its management has to manage the business for the long run, and this means having a suitable dividend policy in place. 

Its experienced management team has managed this well. In fact, the company is generating cash over and above its dividend requirement.

At the beginning of August, the company reported operating profit growth for the fourth year in a row — up 11% as a result of strong business performance worldwide. On the back of these numbers, the company was able to increase its interim dividend per share by 13%. For the full year, analysts believe that the firm will support a yield of 5.2% with the payout covered twice by earnings per share. 

As the world’s population grows, the demand for pensions and savings is only increasing, and Aviva is well placed to benefit from this growth. As earnings rise further, the company’s dividend should increase as well. 

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Rupert Hargreaves does not any share mentioned. The Motley Fool UK has recommended Fidessa. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Long-term opportunities

The company benefitted from the weakness of sterling, with 2% constant-currency revenue growth boosted to 12% at actual exchange rates. Similarly, a 2% increase in profit before tax at constant currency (excluding legitimate one-off costs of an office move) was boosted to 14% at actual exchange rates.

As has been the case for some time, political uncertainty, structural and regulatory changes are continuing to have an impact on the market conditions being faced by Fidessa’s customers. However, near-term prospects appear to be improving, with the company noting that delays in customer decision-making started to ease slightly during Q2. Longer-term, it maintains it’s well positioned to benefit from the opportunities presented by regulatory and structural change.

Good value

The company had cash of £71m and no debt at the half-year-end. It continues to be a strong generator of cash, even in the less-than-ideal conditions that have prevailed of late. For example, the board paid a 50p-a-share special dividend last year alongside an ordinary dividend of 42.5p and the City expects more of the same this year. A total payout of 94p is pencilled-in, giving an attractive yield of 4.1% at a share price of 2,300p.

Less attractive, on the face of it, is Fidessa’s earnings multiple of 24.7. However, taking into account the company’s strong cash position and what I view as its sound long-term prospects for earnings and dividend growth, I reckon the business is good value for its £890m market cap and I’d buy a slice of it today.

Updated old school

At a share price of around 3,600p, Metro Bank (LSE: MTRO) has a market cap of £3.2bn, trades on an earnings multiple of 124 and pays no dividend.

This challenger bank has a strategy that flies in the face of current banking orthodoxy. It’s opening branches rather than closing them, opening them for longer hours, including evenings and weekends, and making them dog-friendly and child-friendly among other things.

It’s a strategy that billionaire founder and chairman Vernon W Hill II employed successfully with Commerce Bancorp in the US between 1973 and 2007. Metro is currently growing its number of customers — or “fans” as Mr Hill prefers to call them — at a grand old rate and last week raised a further £278m from investors “in order to support this momentum and the company’s future growth ambitions.”

Despite the enthusiasm of its backers, I’ve marked this stock as one I’m avoiding. While the business looks set for terrific growth from a low base in the near term, this looks to be baked-in to the current valuation. Perhaps more importantly is the longer term. I have doubts about whether Metro’s business model will have fans flocking to it in 10, 20, or 30 years’ time. I fear updated old-school may not have a long shelf life as the 21st century rolls on.

The post One FTSE 250 growth stock I’d buy right now, and one I’d avoid appeared first on The Twelfth Magpie.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended Fidessa. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Adjusted profit before tax for the period increased 25%, and adjusted earnings per share jumped 32%. Statutory profit before tax increased 90%. The company also increased its cash balance to £51.9m, compared to £21.3m last year, giving it a strong balance sheet with which to pursue growth opportunities.

Throughout the financial year, the company invested nearly £50m in organic growth opportunities and capital spending. This investment came out of its full-year cash flow from operations of £115m. 

Built from the ground up

One of the reasons why it has performed so well over the years is that the company is still majority-owned by its two founders, who obviously want the business to perform as well as possible. 

Chief executive and chairman David McMurtry and deputy chairman David Deer together own around half of the outstanding shares. Further, the business has a strong work culture, encouraging talent and treating its employees well. Management has always worked hard to keep jobs rather than cut them during cyclical downturns, hence the firm’s strong balance sheet. 

Bright outlook 

Renishaw has all the hallmarks of a well-run business that works for all of its stakeholders and demand for the company’s expertise should only grow in the years ahead. 

You see, it is a leading producer of encoder, measurement and automation, calibration and coordinate measuring machine devices used in the construction of automated production systems. As demand for robotics solutions increases around the world, demand for these highly specialised measuring devices will almost certainly rise. 

With its existing experience, strong work ethic and robust balance sheet, Renishaw is well placed to capitalise on this trend and extend the record of growth the group has accomplished over the past five years. Unfortunately, thanks to the company’s recent growth and specialist nature, the shares trade at a forward P/E of 33, a high valuation but one that seems suitable for such a promising business. 

Slow and steady 

Fidessa Group (LSE: FDSA) is another specialist company that has grown steadily over the past five years. The group provides trading and investment information solutions for the financial services industry.
Over the past three years, pre-tax profit has grown by 26%, and earnings per share have risen by 20%. 

City analysts are not expecting much in the way of growth in the business this year with an earnings per share fall of 1% projected. Next year, on the other hand, growth of 8% is expected, and analysts believe the shares will support a dividend yield of 4.1%. 

Even though shares in Fidessa might seem expensive, trading at a forward P/E of 25.7, the highly specialised nature of this business means that it is unlikely to see a substantial decline in revenue or profitability.

The post Renishaw plc is a terrific stock for cautious growth hunters appeared first on The Twelfth Magpie.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended Fidessa and Renishaw. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Could this FTSE 250 firm, which services 85% of the world’s premier financial institutions (from investment banks to niche hedge funds), be a better investment than one of its prominent FTSE 100 banking clients?

Solid results

Fidessa’s revenue, earnings and dividend were comfortably ahead of City expectations but the shares are only modestly higher in early trading. The headline numbers received a huge boost from weakened sterling since the Brexit vote. For example, while it reported pre-tax profit up 25%, the rise at constant exchange rates was just 1%.

Nevertheless, these were solid results. Fidessa ended the year with £95m cash on the balance sheet (up from £78m the previous year) and no debt. The board lifted the final dividend and regular special dividend by 11%.

Financial regulation continues to be a long-term driver for Fidessa’s growth as customers focus on efficiency, transparency, compliance and performance. In the shorter term, the company noted that customers have been faced with uncertainty around how the Brexit vote and the US election results might affect their business.

A premium worth paying

Fidessa’s shares recovered quickly from the financial crisis and from their 2009 year-end price have more than doubled to a current 2,450p, giving a market cap of £945m. However, only about a third of this increase reflects earnings growth, with the majority coming from the market simply valuing the company’s earnings more highly. The price-to-earnings (P/E) has therefore risen from 16.8 to 26.2.

Today’s P/E is obviously relatively high but Fidessa’s strong balance sheet, international diversification, 87% recurring revenue and a 3.8% dividend yield merit a premium rating, in my view. The stock may have been cheaper in the past but I continue to see this as a good long-term investment today.

A £7.5m vote of confidence

Shares of Barclays (LSE: BARC) had recovered from the financial crisis to over 350p by late 2009. However, in contrast to Fidessa’s, they’ve made no progress since. In fact, Barclays’ shares have been below 300p for the best part of the last four years.

Legacy issues have continued to dog the company but I still think there’s a good underlying business here and long-term value to be delivered for investors. Chief executive Jes Staley, who took the helm in December 2015, is obviously of the same mind, because he bought £6.5m of shares at 233p before even getting his foot through the boardroom door. When the shares fell to 170p, he splashed out another £1m.

Re-rating potential

At the time of Mr Staley’s first buy, Barclays was trading at a near-20% discount to net tangible asset value, a level from which I thought investors could reap substantial long-term rewards. At the time of his second buy, the discount was 40%, which I thought was terrific value.

Today, the shares are at 230p, back to a near-20% discount to net tangible asset value, so I still see substantial long-term rewards for investors from here. Barclays’ P/E for the current year is a modest 11.8, falling to 10 for 2018, as strong earnings growth is expected to kick in.

As such, while I think Fidessa is a solid investment, I believe Barclays could be set for the kind of re-rating in the coming years that Fidessa has enjoyed in the past.

The post Is this mid-cap stock a better buy than its FTSE 100 banking client? appeared first on The Twelfth Magpie.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended Barclays and Fidessa. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Show me the dividends

The London-focused group also revealed that on average, lettings had been secured at 6.9% ahead of December 2015 ERV, with vacancy rates remaining low at just 3.3%. Meanwhile Derwent is continuing to make progress with its major development programme under construction, of which 400,000 sq ft is due for completion by the second half of next year, with 66% already pre-let. An additional 620,000 sq ft is due for completion in 2019, including the Brunel Building in Paddington, central London.

In the second half of the year Derwent sold three properties for a total consideration of £130.1m, and on average these have been in line with June 2016 book values. But the company has admitted that the EU referendum introduced considerable market uncertainty, and together with the rise in Stamp Duty Land Tax in March, and recent confirmation of the higher business rates from April 2017, it has had a negative impact.

Derwent London has been operating as a Real Estate Investment Trust since 2007, but despite shareholder payouts being increased every year, the dividends have failed to keep up with the soaring share price, resulting in disappointing yields for income seekers. Derwent’s shares have looked expensive for quite some time, and at the end of 2015 the company’s was trading at 52 times actual earnings.

The prospective yield looks far healthier at the moment following this year’s share price slump, but at just 2% is still well below what I would expect from a property investment firm. In my view, there are plenty of other property investment firms out there with more modest valuations and healthier yields.

Premium valuation

Trading systems provider Fidessa Group (LSE: FDSA) is another mid-cap firm that has recently highlighted the uncertainty it faced as a result of the Brexit vote. However, the Woking-based software firm derives more than 60% of its revenue from outside Europe, and believes it remains well positioned to benefit from any continued weakness in sterling, providing further support for its strong cash generation and dividend policy.

The software group, which provides trading, investment and information solutions to the financial community, has seen little or no earnings growth over the last four years, and yet commands a premium valuation. And although market consensus suggests a return to growth this year, this will be no more than single-digits, and certainly not deserving of its high P/E rating of 28.

The post The most overvalued stocks in the FTSE 250? appeared first on The Twelfth Magpie.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has recommended Fidessa. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fusionex’s trading update covers the year to 30 September. It shows that the company has continued to deliver on its strategy and has made strong progress following a positive first half of the year. In particular, Fusionex has successfully launched the next generation of its proprietary Big Data Analytics (BDA) platform, GIANT 2016. It has also provided blue-chip enterprise organisations with BDA software, with GIANT 2016 opening up a new addressable market across small and medium-sized businesses.

As a result, Fusionex believes that while revenue will be in line with market expectations, EBITDA (earnings before interest, tax, depreciation and amortisation) will be significantly ahead of market expectations. This has significantly boosted investor sentiment in Fusionex and has sent its shares 17% higher today.

Looking ahead, more capital gains could be on the horizon. Fusionex expects the positive momentum of 2016 to continue into 2017, which could mean further improvements in its financial performance. Therefore, buying it now for the long term could be a sound move.

Of course, Fusionex is a relatively small business which, while profitable at the EBITDA level, isn’t due to record a black bottom line over the next couple of years. In fact, its pre-tax loss is forecast to be £0.6m in the current year. As such, Fusionex remains relatively risky compared to a number of its sector peers.

Less risk?

For example, information solutions provider Fidessa (LSE: FDSA) is expected to grow its bottom line by 8% in the current year and by a further 7% next year. This is slightly ahead of the expected growth rate for the wider market and when combined with Fidessa’s relatively stable and consistent business model, means that the company has long-term appeal.

Furthermore, Fidessa has a yield of 3.7%. This is much higher than Fusionex’s 0.7% yield. Although Fidessa’s dividend is set to be covered just 1.1 times by profit next year, the robust nature of its financial performance in recent years shows that its dividend should be relatively secure. That’s especially the case as Fidessa’s profit growth prospects mean its dividend headroom should increase over the medium term.

However, Fidessa lacks the long-term growth potential of Fusionex. Therefore, investors who are less risk-averse and who are seeking high potential rewards may prefer to buy Fusionex. But for many investors the relative stability, superior income visibility and high yield make Fidessa the better option for the long term. That’s especially the case since the outlook for the global economy remains uncertain, which could make the market more risk-averse and favour more stable companies such as Fidessa.

The post Will this growth stock soar after profit beats expectations? appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended Fidessa. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Software star

Shares in IT giant Fidessa Group (LSE: FDSA) were basically unchanged in Thursday trade, despite the release of a positive trading update.

Although trading conditions remain difficult for the software play’s client base, Fidessa advised that

“the themes Fidessa saw during 2015 are continuing, with more opportunities opening up as customers position their businesses for the future.”

Indeed, Fidessa said that it expects the investments made during the recent downturn to leave it well positioned for the near-term and beyond.

The City certainly believes that Fidessa is a company on the rise, and expects earnings to rise 4% in 2016 and 5% in 2017. While subsequent P/E ratings may be a tad heady on paper, a dividend yield of 3.5% through to the end of next year helps to mitigate these elevated multiples. I reckon Fidessa could prove a canny growth pick as market conditions steadily improve.

Over and out?

Things are not quite as bubbly over at digital radio manufacturer Sepura (LSE: SEPU), however. The stock continues to oscillate wildly, and although shares are up 18% in Thursday business, Sepura’s value is still down almost three-quarters since the start of the month.

Sepura announced at the beginning of April that “two significant opportunities” had not been signed-off in time for the close of the year. As a result, the radio specialists expected EBITDA for the period to March 2016 to register between €16m and €20m.

This estimate was confirmed today, with full-year earnings chalked up at €17m. However, the failure of Sepura to close out the orders has placed huge stress on the balance sheet. The company now plans to raise £50m via a rights issue, and has commenced talks with its creditors over possible covenant breaches.

Still, today’s release further illustrated the breakneck demand for Sepura’s gizmos, with organic revenues rising by 10% last year to €145m.

The City consequently expects earnings to surge 96% and 11% in 2017 and 2018 respectively, resulting in P/E ratios of 9.8 times and 9.1 times. And these ultra-low readings suggests that the near-term risks facing Sepura are currently baked into the share price.

WANdisco dances higher

Software play WANdisco (LSE: WAND) has fared much better in Thursday’s session, with an 18% surge taking the stock to levels not seen since last July.

The market became giddy following news that the firm had inked a non-exclusive OEM sales agreement with IBM, a move that will see WANdisco’s Fusion data replication product installed as a standard component for the US giant’s storage and analytics software.

WANdisco advised that

“whilst we expect that revenues will begin to flow during the second half of this year, we will provide further guidance once product launches have taken place and initial customer uptake has been evaluated.”

News of monster deals like these should, of course, make investors sit up. But the full financial impact of this latest accord is yet to be evaluated. And in the meantime, WANdisco is likely to remain at the mercy of variability in new contract bookings.

The City expects the tech play to remain in the red for the foreseeable future, with losses of 67 US cents and 55 cents expected for 2016 and 2017 respectively. I reckon investors should give WANdisco a miss until it can show signs of sustained revenues growth.

The post Should you buy WANdisco plc, Fidessa Group plc & Sepura plc & today? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Fidessa. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

In control

Shares in instruments and controls specialist Spectris (LSE: SXS) took off during the course of last week, gaining 19% between last Monday and Friday. Investor appetite was helped following Spectris’s latest financials on Tuesday, which showed that sales had edged 1% higher in 2015 to £1.2bn.

This was a solid performance given the challenging state of the firm’s end markets, and revenues are anticipated to pick up, with the company planning further product launches and acquisitions. Indeed, Spectris bought out Switzerland’s CAS Clean Air Service just today.

With heavy restructuring also ticking along nicely, the City expects the London firm to bounce from recent earnings losses and punch a 23% earnings jump in 2016. This leaves Spectris dealing on an attractive P/E rating of just 14.8 times, while a sub-1 PEG rating, at 0.7, underlines the firm’s decent value relative to its growth prospects.

On top of this, a predicted 52.5p per share dividend — yielding a handy 3% — sweetens the investment case.

Software strider

Software provider Fidessa (LSE: FDSA) also enjoyed a massive share price ascent during the course of last week, the stock adding 29% between Monday and Friday.

Like Spectris, Fidessa benefitted from strong full-year numbers, the company advising last Monday that revenues leapt 7% in 2015 to £295.5m despite volatile trading conditions. And encouragingly the firm advised that its end markets “continue to improve with increasing opportunity for new services.”

The number crunchers do not believe that Fidessa will enjoy explosive bottom-line growth in the near-term, however, and a predicted 2% advance leaves the business dealing on an elevated P/E rating of 23.9 times. But a predicted dividend of 86.8p per share, yielding a huge 4.4%, helps to offset the high multiple.

A power pick

While it is true that resurgent risk appetite has propelled stock markets higher over the past week, there is no doubt that plenty of ‘mud’ — from fears over extreme Chinese cooling to the outcome of June’s ‘Brexit’ vote — remains in the system that could drive share prices through the floor again.

As a consequence, demand for quality defensive companies remains very much alive, a factor that helped to drive National Grid (LSE: NG) 3% higher between last Monday and Friday. And I expect the electricity network operator to keep chugging higher as the fruits of its vast investment programme in the UK and US drive earnings in the near-term and beyond.

The City expects National Grid to enjoy a 4% earnings bounce in the year to March 2016 alone, resulting in a very-decent P/E rating of 14.9 times. And when you also factor in a projected dividend of 43.7p per share — yielding a mammoth 4.8% — I believe there is plenty of room for the power play’s shares to positively re-rate.

The post Can Last Week’s Winners National Grid plc, Spectris plc & Fidessa Group plc Keep Charging? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Fidessa. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.