Broker reaction to discoverIE Group PLC's (LSE:DSCV) interim results was largely positive with the American outfit Stifel wondering whether the figures represented a 'bounce, or an inflexion point'.
Highlights for the custom electronics group were the operating margin, which grew to a record 13.8% in the period, putting it well on course for its 15% target, and its prodigious cash flow generation.
Focus on the former allowed the business to increase its underlying profits by 4% at constant currencies to £29.1 million as revenues fell 5% to £211.1 in the six months ended September 30. The update led to a 17% jump in the value of the stock.
"The spike in the share price simply gets discoverIE back into the trading range seen through [the first half] this year," Stifel noted, repeating its 'buy' recommendation.
"That is welcome (and justified in our view). But while we see scope for substantial further upside, we suspect that proof of a wider inflexion is sales momentum may be required before this is fully realised."
Panmure Liberum also reckons discoverIE is undervalued trading on around 17 times earnings, a steep discount to peers on 28 times and its two-year peak of 26 times. The broker is a 'buyer' up to 990p.
Deutsche Bank, which rates the stock 'hold', reckons the order pickup outlined in the interim statement 'bodes well' for magnetics and controls business.
After a strong run on Tuesday, the shares were unchanged at 732p.