Scapa Group - Bonkers valuation of the week
The high valuation assigned to this manufacturer of bonding solutions and adhesive components has been a puzzle to us for many years. Although the shares are well-off previous highs the valuation still looks bonkers, as we consider here.
Results from Scapa Group (LON:SCPA) for the year ending 31 March 2019 saw revenue climb 7 per cent to £311.8m and adjusted earnings per share rise a modest 3.8 per cent to 18.9p. At the current share price of 335p this suggests the shares trade at a seemingly acceptable multiple of 17.7x reported earnings, however, this doesn’t present the full picture. Look closer and diluted earnings per share were only 5.2p, pushing the price earnings multiple to a heady 64x. The company conveniently focuses on their definition of ‘trading profit’, rather than ‘operating profit’, in calculating earnings per share. For the…