Shares for the future: why I’ve got to dump this stock
After rescoring two of the companies in his 30-strong Decision Engine, analyst Richard Beddard has decided one of them has to go. Here, he explains his thinking.
26th September 2025 15:00
by Richard Beddard from interactive investor
I’m using a summer lull in annual reporting to re-score some of the Decision Engine shares that have yet to be scored using my new format. It seeks to more rigorously identify businesses that have been successful, the risks they face, and how effectively their strategies address them.
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Rescoring Renew
Renew Holdings (LSE:RNWH)’s score is unchanged.
Renew | RNWH | Maintenance and improvement of national infrastructure | 24/09/2025 | 7.8/10 |
How capably has Renew made money? | 2.5 | |||
Under its current executives, Renew has achieved low double-digit growth in revenue and profit and high returns on capital since 2018. The share count has increased at 3% compound annual growth rate (CAGR) to fund the acquisition of businesses in diverse sectors with skilled workforces. It has invested to train, motivate and equip them. | ||||
How big are the risks? | 2.5 | |||
Renew has modest financial obligations and is paid out of operating budgets of infrastructure owners, which generates reliable cash flows. 40% of revenue probably comes from Network Rail, but relates to many projects. Provisions against legal claims against a business sold in 2014 are a bit of an unknown. | ||||
How fair and coherent is its strategy? | 2.5 | |||
By focusing on employees, Renew can provide a better service than contractors who rely heavily on subcontractors. Acquired subsidiaries work together and high Return on Tangible Invested Capital (ROTIC) suggests they may generate more value than they would alone. Renew should disclose more stats to help us judge the strategy. | ||||
How low (high) is the share price compared to normalised profit? | 0.3 | |||
Low. A share price of 822p values the enterprise at £667 million, about 17 times normalised profit. | ||||
NB: Bold text indicates factors that reduce the score. Bold and italicised text doubly so. The maximum score is 3 for each criterion except price, which has a maximum of 1 (explainedhere) | ||||
Maybe I was primed to look favourably on Renew. Just before I re-scored it, I read an article in the Financial Times about a big infrastructure project, the Thames Tideway super sewer, that was almost on schedule and almost on budget. It is an old aphorism in journalism that “dog bites man” is not news, but “man bites dog” is. A successful large scale construction project is so uncommon in my mind, it’s a dog bites man story.
One of the reasons given for Tideway’s success by the outgoing chief executive is how the project dealt with the UK’s complex construction supply chain. It passes risk down through layers of subcontractors, often with poor cash flow and tight margins. Day workers are sometimes employed on zero-hour contracts. These businesses often cut corners to make a profit.
In contrast, Tideway fully employed all 25,000 people who worked on the project. It paid them at least the London minimum wage, trained them, provided uniforms, and holiday pay.
Renew does not build large new infrastructure, it maintains and improves the nation’s existing rail, road, water, and energy infrastructure. I last scored the company in February. The attractions of the business are its complete focus on engineering (it has disposed of construction businesses) and its people-focused culture. The company has a direct delivery model (as opposed to subcontracting), employing 4,400 people. It says they are “always learning”.
Unlike fully listed firms, AIM-listed companies are not required to disclose the ratio of chief executive pay to median pay, and very few do. Creditably Renew does, partially. In 2024, the CEO’s basic pay was 12 times the average worker’s, which means the median employee earns about £34,000 a year in basic pay (a low-paid employee on the 24th percentile earns about £29,000). It’s not a king’s ransom, but it’s more than the living wage.
The company is settling legal claims against one of its legacy construction businesses, which I flag because it’s a bit of an unknown. The current level of provisions is not a significant threat to cash flow.
It frustrates me that Renew does not tell us how much it makes from each of its major markets. Since work is funded by the government these markets can be disrupted when they move from one regulatory funding period to another and priorities change. Work on the railways has been subdued for a year or so for this reason. Knowing the revenue split would make it easier for us to judge the potential impact, and also the level of diversification in the business.
Despite these wrinkles, I still think Renew is a good long-term investment. Renew’s financial year ends this month, and the company published a trading update on 1 October last year, so we will probably get an update soon.
Earlier in the year the company expected low double-digit revenue growth but anticipated little profit growth.
Rescoring James Halstead
James Halstead (LSE:JHD) has lost a point.
James Halstead | JHD | Manufactures sheet vinyl and luxury vinyl tile (LVT) flooring | 24/09/2025 | 6.7/10 |
How capably has James Halstead made money? | 2.0 | |||
Family-owned James Halstead has grown revenue and profit at low single-digit CAGRs by manufacturing sheet vinyl and some LVT products (it imports others). Its global salesforce "motivates and cajoles" distributors to sell to end customers, principally in the UK and Europe. It has been highly profitable and cash generative. | ||||
How big are the risks? | 2.5 | |||
Profits have accumulated in a cash pile, the company is an efficient manufacturer and UK market leader, and management is conservative and experienced, family ownership is not excessive (30%). I wonder if shipping costs and market preferences limit its potential further afield. | ||||
How fair and coherent is its strategy? | 1.5 | |||
James Halstead wastes few words on strategy, and I think shareholders deserve more detail. Efficient manufacturing and a focus on sales has achieved high returns but low growth, so maybe we can expect the same in future. It says it has a high workforce retention rate, without providing statistics. | ||||
How low (high) is the share price compared to normalised profit? | 0.7 | |||
Low. A share price of 149p values the enterprise at £583 million, about 14 times normalised profit. | ||||
NB: Bold text indicates factors that reduce the score. Bold and italicised text doubly so. The maximum score is 3 for each criterion except price, which has a maximum of 1 (explainedhere). | ||||
I scored James Halstead in November last year and the company will report its full-year results in October. Its record of low growth will not be enhanced by the results for the year to June 2025. It said in July that it expects revenue and profit to be slightly below levels reached in 2024.
The company sells two kinds of vinyl flooring: sheet vinyl, often used to floor hospitals and schools where durability and performance is paramount, and Luxury Vinyl Tile (LVT), often installed by hotels and retailers. Here, aesthetics can be more important. Lower LVT sales to European retailers was the main detractor in 2025.
James Halstead frustrates me. I think sheet vinyl, which it manufactures in the UK, is more profitable than LVT, but this is one of many things I’d like to know about the business. The company keeps its cards close to its chest.
It also seems likely that James Halstead is the market-leading supplier of sheet vinyl in the UK, but it’s less competitive the further afield it sells, maybe due to shipping costs. This may limit its expansion beyond Europe, its other big market.
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The company pays a generous dividend and it is cash rich, but unless it can find a profitable way to invest the cash I don’t have any reason to believe it will grow any faster than it has in the past.
Although a score of 6.7 evaluates to an ideal holding size of 3.3%, I have decided to drop James Halstead from the Decision Engine.
Shares that I cannot fathom prey on my mind, and I don’t want to go round in circles every year trying to substantiate theories the company itself will not comment on.
If the tenor of its annual reports changes, it could make a comeback. That might happen as soon as next month when the company publishes its annual report for 2025. It has a new chief executive, but since he’s the old chief financial officer, the continuation candidate, I doubt the report will be more forthcoming.
James Halstead is not in the Share Sleuth portfolio. Jettisoning the share from the Decision Engine, will free me up to score another company. It will allow me to cast my net wider and, perhaps, find a better candidate for the portfolio.
21 Shares for the future
Here’s the ranked list of Decision Engine shares. I review the scores at least once a year, soon after each company has published its annual report. The price scores are calculated using the share price prior to publication.
Generally, I consider shares that score more than 5 out of 10 to be worthy of long-term investment in sizes determined by the ideal holding size (ihs%).
I’m re-scoring Hollywood Bowl Group (LSE:BOWL) and Quartix Technologies (LSE:QTX).
company | description | score | qual | price | ih% | |
1 | FW Thorpe | Makes light fittings for commercial and public buildings, roads, and tunnels | 8.5 | 0.3 | 7.7% | |
2 | James Latham | Distributes imported panel products, timber, and laminates | 7.5 | 1.0 | 7.0% | |
3 | Howden Joinery | Supplies kitchens to small builders | 8.0 | 0.5 | 7.0% | |
4 | Oxford Instruments | Manufactures scientific equipment | 7.0 | 1.0 | 6.0% | |
5 | Jet2 | Package tour operator and leisure airline | 7.0 | 1.0 | 5.9% | |
6 | Macfarlane | Distributes and manufactures protective packaging | 7.0 | 0.9 | 5.8% | |
7 | Solid State | Manufactures electronic systems and distributes components | 7.0 | 0.9 | 5.8% | |
8 | Bunzl | Distributes essential everyday items consumed by organisations | 7.5 | 0.3 | 5.6% | |
9 | Porvair | Manufactures filters and laboratory equipment | 8.0 | -0.2 | 5.6% | |
10 | Hollywood Bowl | Operates tenpin bowling centres | 7.8 | 7.5 | 0.3 | 5.6% |
11 | Renew | Maintenance and improvement of national infrastructure | 7.8 | 7.5 | 0.3 | 5.5% |
12 | YouGov | Surveys and distributes public opinion online | 7.5 | 0.1 | 5.2% | |
13 | Softcat | Sells hardware and software to businesses and the public sector | 8.0 | -0.5 | 5.1% | |
14 | Bloomsbury Publishing | Publishes books and educational resources | 7.5 | 0.0 | 5.1% | |
15 | Churchill China | Manufactures tableware for restaurants etc. | 6.5 | 1.0 | 5.0% | |
16 | 4Imprint | Customises and distributes promotional goods | 8.0 | -0.6 | 4.8% | |
17 | Renishaw | Whiz bang manufacturer of automated machine tools and robots | 7.5 | -0.3 | 4.3% | |
18 | Auto Trader | Online marketplace for motor vehicles | 8.0 | -0.9 | 4.3% | |
19 | Advanced Medical Solutions | Manufactures surgical adhesives, sutures and dressings | 6.5 | 0.6 | 4.2% | |
20 | Focusrite | Designs recording equipment, synthesisers and sound systems | 6.0 | 1.0 | 4.0% | |
21 | Games Workshop | Designs, makes and distributes Warhammer. Licenses IP | 8.5 | -1.5 | 3.9% | |
22 | Dunelm | Retails furniture and homewares | 8.0 | -1.1 | 3.9% | |
23 | Judges Scientific | Manufactures scientific instruments | 7.5 | -0.6 | 3.9% | |
24 | Anpario | Manufactures natural animal feed additives | 7.0 | -0.2 | 3.6% | |
25 | Volution | Manufacturer of ventilation products | 8.0 | -1.3 | 3.3% | |
26 | Keystone Law | Operates a network of self-employed lawyers | 7.5 | -1.0 | 2.9% | |
27 | Cohort | Manufactures/supplies defence tech, training, consultancy | 8.0 | -1.7 | 2.5% | |
28 | Goodwin | Casts and machines steel and processes minerals for niche markets | 8.0 | -2.0 | 2.5% | |
29 | Tristel | Manufactures disinfectants for simple medical instruments and surfaces | 7.5 | -2.0 | 2.5% | |
30 | Quartix | Supplies vehicle tracking systems to small fleets | 5.4 | 7.5 | -2.1 | 2.5% |
Click on a share's score to see a breakdown (scores may have changed due to movements in share price). Key: qual is the share’s score out of 9 for the three quality factors (capabilities, risks, and strategy), price is the price score from -3 to +1, and ih% is the suggested ideal holding size as a percentage of the total value of a diversified portfolio.
Richard Beddard is a freelance contributor and not a direct employee of interactive investor.
Richard owns Renew and many shares in the Decision Engine. He weights his portfolio so it owns bigger holdings in the higher -scoring shares.
For more on the Decision Engine, please see Richard’s explainer.
Contact Richard Beddard by email: richard@beddard.net or on Twitter: @RichardBeddard
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