OUY Solid State PLC is a publicly-traded company on the London stock exchange. Ticker symbol (LON: SOLI) Throughout the article, we will refer to it as the company or OUY. The company primarily sells and manufactures electronic equipment throughout the U.K, Europe, Asia, and internationally.
The company was formally known as Solid State Supplies PLC and changed its name in 2006 to Solid State PLC. The company was formed in 1963 and is currently based in Redditch, U.K.
OUY Growing Returns On Capital Employed
Investors seek out a potential growth company that might multiply in value on a long-term basis. They aim to identify a growing return on Capital Employed (ROCE) and an increasing base of capital employed.
This mainly indicates that the given company has profitable initiatives that it can reinvest in. But OUY may not fit the trend of the multi-bagger.
ROCE is a measure of a company’s yearly tax profit relative to the business’s capital. Solid State has a ROCE of 15%, a satisfactory return, but when you compare it to the electronics industry, a 7.2% average is better.
ROCE Trend
OUY has fallen 22% over the previous five years, but it looks like it is reinvesting in long-term growth. The capital employed has increased, but the company sales have not changed throughout the year. As investors, it would be best if we kept an eye on the company’s earnings. To discover if the investments contribute to the bottom line.
OUY has done an excellent job keeping its liabilities to 29% of total assets, which can be linked to the decrease in ROCE. This could be good news for the company because suppliers or creditors are funding less of its operations. This means the company is funding more operations themselves.
OUY On An Uptrend
The company’s stock increased by a significant 8.5% over the last month. Its good to note that the company’s fundamentals will usually dictate the market outcomes. We can keep a close watch on the return on equity (ROE) to discover how effectively the company manages investors and grows its value. It primarily measures the profitability of a company relating to shareholder’s equity.
OUY does stand out compared to the industry averages being 8.0% (ROE), with Solid State being 15% (ROE). But the returns do not reflect the company’s net income growth being 2.6% over the previous five years. When a company has a high rate of return, it will usually have a high earnings growth rate. This could indicate that OUY has a high payout ratio or poorly allocated capital.
When you compare the company’s net income growth rate to the industry, it is lower than average, with the industry demonstrating 17% for the same period. Earnings growth is an important metric for investors to consider when evaluating a stock. It indicates whether the market is priced in the company’s expected growth or declined. It also gives you the indication to unravel the company’s future.
OUY has small growth earnings, but it has a good payout ratio of 43%. There could be many explanations; one of them could be a deteriorating business. Adding to this, the company has paid dividends throughout the previous ten years, meaning that the company has to pay dividends, even when it means no earnings growth.
OUY Gains 38%
When investors buy an index fund, they can determine the average market return. But when choosing an individual stock showing promise, making a superior return is likely. Solid State has increased by 38% over the previous three months. Recent returns have not been too impressive, with the stock returning 25% throughout the last year, including dividends.
One way investors can examine how the market has changed over time is to seek the interaction between the company’s share price and its earnings per share (EPS). OUY achieved (EPS) growth of 14% per year throughout the last three years. This could be an indication that investors have become more cautious with the stock.
When analyzing a stock, we also need to consider the total shareholder return (TSR) and the share price return. The TSR gives a comprehensive view of the returns generated by a stock. Solid State was 51% TSR throughout the last three years. The dividends paid have boosted the TSR.
Technical OUY Chart
The stock is currently trading at 886 and has been trading in an uptrend since last June. The momentum is strong, showing steady volume. RSI indicator is neither overbought nor oversold. Currently, the stock is in a potential pullback, with a support area of around 816 on the daily chart. A retest of the area would be ideal with further confirmation of price action to continue the uptrend. A break below 816 may present a change of trend or deeper correction to the downside, awaiting price action to confirm, by a potential pullback to the resistance level, with a retest. The current analyst rating for OUY is a BUY.
What Are The Alternatives?
Solid State’s earnings increase over the last year is forecast at roughly 15.3% and paying a reliable dividend of 1.42%. Burberry Group PLC forecasted earnings for one year are 21.3%, there is more risk involved with the company’s profit margins are down by 3% compared to the previous year. Aviva Group PLC earnings are expected to grow by 51.26% for the year, but earnings do not cover the dividend well, on the upside, it is undervalued by 20.3%
Summary
OUY is reinvesting in the business, but the returns have been falling. The stock has gained 39% throughout the last five years. This could mean that investors participate in it going forward.
The company does have some promising attributes; with the high ROE and increased profit retention, the company would be expected to deliver strong earnings growth. Unfortunately, this is not the case. It may suggest that something is hampering its growth. It is best to assess the risk of the company to give us an overall objective.
It is good news that shareholders witnessed returns of 25% throughout the last year, including the dividend. The overall sentiment of the company has been positive, with TSR being 9% over five years. The momentum remains strong, and it could be worth taking your time to evaluate this stock. It is always best to consider the market impact on the share price.
OUY is an attractive dividend stock option to consider. Its earnings per share have been steadily growing; OUY is paying out under half its earnings and cash flow as dividends. This could suggest that the management is heavily reinvesting in the business, providing room for the dividend to increase. It is preferable to see earnings growing a bit faster, but it could conclude that solid State is indeed halfway there. There are many significant things to like about this stock, and it’s worth taking a closer look.
Alternatives like Burberry Group Plc or Aviva Group Plc could be explored for further potential or risk, with most of the company’s offering a dividend yield. There are advantages and disadvantages with the stocks discussed, so further research is advisable to gain a complete overview of the company and stock price.
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