Knights group (LON:KGH) Market cap of just £58M and a current price of 67p, Stockopedia gives it a value score of 90 and quality score of 63.
I first noticed the company a couple of years ago when the CEO sold approx. £61m of shares. A year later, almost a year to today, the company gives out a profits warning and the share price crashed from 355p to 135p. On 22nd November 2022, the CEO David Beech buys back £1m worth of shares. He currently holds 22% of the company.
So having watched the share price slowly corrode, I wonder if this is indeed a good valued company to buy into now. All time high of the share price was 472p (ish) and all time low of about 60p, which it is not far of now.
Besides the stock ranks, Knights group (LON:KGH) has a low PE of 3.4, PEG of just 0.3, a NAV of 102p and even pays a dividend. The revenues have been growing year on year and has gone from £10m revenues 10 years ago to around £140m.
On the negative side, while revenues have increased YOY, so has the debt and ever increasing expenses, while profits have broadly stayed stagnant. Shares in issue have increased 30% over the last 5 years.
Looking deeper into the reports, the revenues increased has come purely from acquisition and no or little organic growth over the years. Now, I have no qualm about acquisitions, but imo, they should be made to enhance to company or to bring in extra sales while consolidating the costs. Well the extra sales have certainly come, but costs have gone up and profits have stayed the same. Now, forecasts are showing profits to rise in the next 2 years so maybe it is working? But then, it hasn't for the last 10 years so why should a forecast be believed?
Looking a bit further into the accounts and in particular the debt, it states a debt of £83m on stockopedia, which is a fair bit more than the Market cap, but also the company has Total liabilities of £119m which is double the Market cap. I believe the extra £36m is leases and compensations arranged from the acquisitions the company has made. I also noted £77m costs put down to staff costs (wages).
Now, I am no accountant by any…
