Stockwatch: director buying and new update hint at upside here
At less than half their peak in 2024, this company’s shares have caught the eye of analyst Edmond Jackson. Here’s why he rates them a buy.
20th January 2026 11:13
by Edmond Jackson from interactive investor
Yesterday’s 14% rise in the small-cap shares of Ashtead Technology Holdings Ordinary Shares (LSE:AT.), a provider of subsea technology solutions to the global offshore energy sector, begs the question whether a volatile chart since listing in November 2021 is seeing another climb following a positive 2025 trading update.
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Source: TradingView. Past performance is not a guide to future performance.
Shares in this broad sector can indeed be volatile as we’ve seen with Gulf Marine Services (LSE:GMS) and the disaster that was Petrofac – if chiefly relating to debt and without a frequently positive operations narrative. It is also possible to be a tad cautious that redevelopment of Venezuelan oil could cap crude prices in the longer run, although Ashtead is diversified, also serving the wind farm industry across its project lifecycle.
Risks are also apparent from revenue growth deriving chiefly from acquisitions – 21% versus only 3% organic – in the last financial year, and cost savings from integrating two acquisitions in the fourth quarter being higher than expected, benefiting profit. Yet the tenor is encouraging. It says: “Improved second-half trading and increased visibility from long-term projects provide positive momentum entering the new financial year.”
Yet financial risk is also reducing. Strong cash conversion has resulted in leverage under 1.4x (debt likely contributed to the shares nearly halving last year) and is expected to improve to below 1.0x by end-2026. Ashtead also expects to invest around £35 million in capital expenditure this year “to support its customers, drive returns and further growth”, although it does have a chunky capex profile over the years, so part of this looks inherent to the industry.
I am still encouraged overall by six non-executive directors spending more than £275,000 buying shares since last August, and by a forward price/earnings (PE) ratio of 8.7x based on the expected outcome for 2025, reducing to 8.1x if consensus for £38.4 million net profit is achieved this year.
A dividend yield of barely 0.4%, with payments only introduced cautiously relative to earnings per share (EPS), begs the question as to whether the board is concerned about earnings cyclicality. This also puts investor attention chiefly on capital growth, helping explain the volatile chart where the share price is 1.7x last June’s book value and, due to acquisitions, goodwill plus intangible assets were 104% of net assets.
But with projected earnings above 30x, this appears largely to relate to capex needs, where the financial record shows free cash flow per share less than EPS in four of the last six years’ accounts:
Ashtead Technology Holdings
Year-end 31 Dec
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |
| Turnover (£m) | 47.8 | 42.4 | 55.8 | 73.1 | 110 | 168 |
| Operating margin (%) | 18.3 | 6.4 | 13.6 | 24.2 | 28.3 | 25.5 |
| Operating profit (£m) | 8.8 | 2.7 | 7.6 | 17.7 | 31.2 | 42.8 |
| Net profit (£m) | 5.0 | -1.0 | 2.5 | 12.4 | 21.6 | 28.8 |
| Reported earnings/share (p) | 6.3 | -1.3 | 3.6 | 15.3 | 26.7 | 35.4 |
| Normalised earnings/share (p) | 7.0 | -1.5 | 5.9 | 15.7 | 28.3 | 36.5 |
| Operating cashflow/share (p) | 14.3 | 18.8 | 10.2 | 40.7 | 48.2 | 37.1 |
| Capital expenditure/share (p) | 11.7 | 6.4 | 11.1 | 17.0 | 24.0 | 36.2 |
| Free cashflow/share (p) | 2.6 | 12.4 | -0.9 | 23.7 | 24.2 | 0.9 |
| Dividend/share (p) | 0.0 | 0.0 | 0.0 | 1.0 | 1.1 | 1.2 |
| Covered by earnings (x) | 0.0 | 0.0 | 0.0 | 15.3 | 24.2 | 25.5 |
| Return on capital (%) | 9.7 | 3.3 | 8.6 | 15.5 | 17.5 | 15.4 |
| Return on equity (%) | 10.8 | -2.2 | 4.8 | 18.2 | 25.0 | 25.6 |
| Cash (£m) | 4.9 | 11.0 | 4.9 | 9.0 | 10.8 | 12.2 |
| Net debt (£m) | 47.1 | 36.2 | 22.7 | 28.7 | 61.7 | 128 |
| Net assets/share (p) | 58.0 | 56.3 | 76.8 | 94.2 | 122 | 159 |
Source: company accounts.
Share price fall looks a mean-reversion too far
From the chart you might wonder why the share price has been a roller coaster since listing. Operating margins look to have consolidated around 25%, aiding a similar return on equity and over 15% on total capital employed. It can seem hard to reconcile overall data from the last six years, with a 65% fall in market price from 873p in August 2024 to 306p just before Christmas.
But around their high, the 2025 forward PE was a 20x “growth” rating when energy services tend to have cyclical features.
Specifically, when the shares plunged from 775p to 572p ahead of the 2 September interim results, those numbers showed profit advances in a mid-30% range and basic EPS up 27.5% on revenue up 61%. There was nothing adverse in the outlook statement; indeed the board expressed “increased confidence in our full-year 2024 outturn” although it was not upgraded.
In hindsight, a possible glitch was how management cited a £16.4 million investment in the rental fleet with £30 million targeted overall for 2024, saying: “Organic growth remains a key priority as we continue to expand our capabilities and international reach.” The follow-through of 3% organic growth in 2025 does not validate this.
The acquisitions strategy was also endorsed “as we focus on broadening both our product and services offering, and our geographic exposure to build a platform to sustain medium-term double digit organic revenue growth”.
Yet the shares did not recover their drop, instead continuing in a volatile downwards trend, not arrested even by a move from AIM to a full listing last October. It appears the market in some respects was right to price down Ashtead from a growth rating given caution over the macro outlook affected its narrative from mid-2025.
At the 26 August interim figures, the CEO noted “some market and geopolitical headwinds during the first half...this has somewhat tempered activity and led to a slower seasonal ramp-up of revenues through the second quarter”, although “key projects delayed have now mobilised”. First-half revenues were still affected by the US administration’s policies on tariffs and offshore wind generation, war in the Middle East and adverse US dollar moves.
Ashtead is chiefly UK-oriented but also operates in the US, Singapore and the United Arab Emirates. Management proclaims that it is significantly expanding its international footprint and widening and deepening its customer offering.
It was also asserted mid-year how “globally, our customers continue to report sustained record backlogs supported by significant contract awards in the period” – [suggesting a] robustness overall, just with variations that should be considered inherent to the industry. It hardly justified a continued de-rate to 8x likely earnings late last year.
What I cannot endorse is exactly how strong Ashtead’s competitive advantage is beyond management’s claim to be “a leading provider of subsea technology solutions”. There appear to be at least five direct rivals: Konsberg Ferrotch in underwater robots for inspection, maintenance and repair; Subsea Technology & Rentals; J&S Subsea; Oceaneering International; and Sorskar Mekaniske.
Still, the share price fall looked too far given the acquisitions strategy appears well-executed and debt is reducing. Admittedly, at 30 June it had soared to over £139 million from £76 million a year earlier, offset only by £12 million cash albeit wholly long-term debt where £5.4 million interim finance costs were 23% of £23.2 million operating profit.
Director share purchases affirm essential reading
At the end of August, the chair raised his holding by nearly a third, buying £115,500 worth at 385p. Also that month, four more non-executive directors respectively bought £32,600 worth at 379p, £16,900 at 359p, £10,800 at 370p and £8,200 at 365p.
On 5 January, the senior non-executive director then bought £91,700 worth of shares at 306p, a trebling of his previous holding.
The shares moved from AIM to a full listing last October on a rationale that this “will broaden access to a wider range of international investors, offer greater liquidity in the group’s shares and provide the appropriate platform to execute on our strategy...”, as if share placings might be anticipated in support of further acquisitions. Ashtead has not appeared to raise equity capital since the end of 2021 flotation banked £15.5 million for investment.
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With equities currently in risk-off mode, Ashtead shares traded lower in early dealings today, although they’ve risen since. Brent crude is 0.9% lower and gold up 1.3% as markets struggle to price in the consequences of President Donald Trump’s antics.
If he does like he says with Greenland-related tariffs on US trading partners, we can expect further de-pricing of international business equity if it means a drift towards tariffs, especially tit-for-tat. I would expect the European response might in due course mitigate any impact and, of course, there is always the possibility that US Congress shows it can restrain Trump.
Overall, I think risk/reward on Ashtead Technology merits “buy”, although take care with timing.
Edmond Jackson is a freelance contributor and not a direct employee of interactive investor.
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