It's rarely plain sailing for Ashtead, but our head of markets likes this news from the FTSE 100 stock.
The conundrum which is Ashtead's (LSE:AHT) share price performance versus its actual trading performance appears to be unresolved.
The full-year results themselves are difficult to criticise. Propelled by a particularly strong fourth quarter, the annual numbers reveal an underlying 19% increase in rental revenue, an 11% hike in pre-tax profit and a 29% jump in earnings per share.
A £500 million share buyback programme should also be supportive to the share price, and a 21% increase to the dividend is a clear signal of management confidence in prospects.
The company's acquisitive strategy is set fair, with bolt-on acquisitions and organic growth all adding to the economic wave which the company is riding. With 85% of revenues emanating from the US, and previously fuelled by tax cuts there, Ashtead has indeed been making hay while the sun shines.
Source: TradingView Past performance is not a guide to future performance
It is the company's very reliance on the US which tends to spook investors, however.
Given Ashtead's previous mauling during the financial crisis following a sharp downturn in the construction space, it seems that investors may have been once bitten and twice shy.
Net debt remains high at around £4 billion. While currently containable given the group's cash generation, that would prove to be an immediate noose in the event of a downturn in the US, which on a wider basis is the current topic of debate given some mixed economic numbers of late.
In addition, such an acquisitive nature always carries execution risk, while from an investment perspective the dividend yield of around 2% still seems uninviting.
Markets have been erratic but largely positive this year, as has the Ashtead share price, which has risen 18% in the last six months. Over the last year, though, the picture is rather different, with a 17% decline comparing to a 4% dip for the wider FTSE 100 index.
In terms of outlook, the company needs to show a lessening reliance on the construction market, proving that it has learned its lessons from the past. There are definite signs that such progress is being made and the company remains a market favourite on prospects, with the consensus still signalling a 'strong buy'.
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