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Stock of the week: Cape

Written by:
Helal Miah, investment research analyst at The Share Centre, picks industrial service provider Cape as stock of the week.

We have recently upgraded Cape, the international leader in the provision of critical industrial services principally to the energy and natural resources sectors, to a ‘Buy’ recommendation.

Following on from a positive trading update in January, in March the company reported  a 6% rise in adjusted pre-tax profits to £47.4m. Furthermore, revenue increased by 21.4% to £863.5m which, investors should note, has led to a return to dividend growth forecast for 2018.

Interested investors should note that management expects another strong trading performance in the year ahead, as well as margin improvement at its UK business as a result of restructuring measures. The CEO, Joe Oatley, has been striving to restore market confidence in the group and stated that he remains convinced that the group will deliver increased shareholder value over the medium- to long-term.

Like many in the sector, the share price was hit hard by the fall in commodity prices along with litigation concerns. However, on the basis of his track record we would suggest that investors should back the CEO to restore the fortunes of the company and to enable further longer-term recovery.

We therefore recommend this stock as a ‘Buy’ for a medium- to high-risk portfolio.

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