Shares in custom electronics maker DiscoverIE (LON:DSCV) rallied after the company raised its FY27 outlook. The firm said the strong momentum of Q4 had continued into Q1 with sales and order increasing more than expected.
Strong sales and orders
The Surrey-based group serves the health care, security, power, energy transformation and renewables sectors. Its products range from X-ray detectors used in hospitals and airport scanners to battery energy storage, electric motors and isolator switches.
Sales for the three months to June were up 6% on an underlying basis and 10% including recent acquisitions Storm and Trival. Both businesses are ‘performing well’, and regulatory approval for the acquisition of 3Gmetalworx is progressing, the firm said.
The order book rose 31% on an underlying basis in Q1, taking the book-to-bill ratio to 1.15 times. The firm also said it had a strong pipeline of design wins and M&A opportunities, positioning it for further growth.
Thanks to the positive outlook for sales and orders, FY earnings are already tracking above the company’s expectations. The current consensus is for FY27 pre-tax profit to rise 10% to £57 million from £51.9 million last year.
We have covered DiscoverIE extensively this year, starting with an explanation back in February of why we though the shares were too cheap. Since then the firm has posted two positive updates – three including today’s – and the market finally seems to have noticed.
The firm’s skill in making products specifically designed to its customers’ individual requirements means it has has a loyal client base. It also means customers are tied in for the lifetime of the product, which in some cases can be decades.
Organic growth is supplemented by smart acquisitions, overseen by a CEO and CFO who have been at the firm more than 15 years. Despite management’s proven track record of compounding growth, the shares have fallen out of favour, like so many mid-caps. Hopefully that is about to change as more investors appreciate the opportunity which lies ahead.
Disclaimer: The author (Ian Conway) owns shares in DiscoverIE
