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magazineBuy shares in Photo-Me for its underappreciated earnings potential
With several companies bemoaning challenging macro headwinds and cost pressures it is noteworthy that instant-service equipment company Photo-Me International (PHTM) recently increased full-year profit guidance.
Management believes the company has pricing power which means it can effectively navigate current challenges better than most.
Shares believes the combination of good growth coupled with higher cash generation from the completed restructuring are not reflected in the current rating of eight times 2022 earnings per share.
Another factor which should underpin the shares and contribute to a higher rating is the consistent positive earnings revisions seen over recent months. Firms which receive positive revisions tend to outperform the market.
Since January 2021 analysts have increased their earnings per shares forecasts for 2022 and 2023 by around 22% according to Stockopedia.
The company operates, sells and services a wide range of vending equipment aimed primarily at the consumer market.
The group operates across 20 countries and is focused on four areas: Photo.ME provides photobooths and integrated biometric identification solutions; Wash.ME provides unattended laundry services and launderettes; Print.ME provides high quality printing services; and Feed.ME provides vending equipment for the food service market.
All the firm’s photobooths conform to international rules for photo ID for official documentation, including passports.
One of the strengths of the business is the long-term relationships the company has built with major site owners. The equipment is generally situated in prime locations with high footfall including supermarkets and shopping malls.
Most of the equipment is owned, operated and serviced by Photo-Me’s network of engineers. It pays the site owners a revenue-based commission depending on country, location and type of machine.
The company’s strategy is to expand the number of units in operation and increase the yield per unit.
A good example is the company’s new low-cost laundry machine ‘Flex’ which it said has produced extremely positive early trading results.
The plan is to rapidly deploy Flex across Europe to exploit the strong market opportunity.
The group recently expanded its self-service fruit juice operation and entered the pizza vending machine market via an acquisition.
Photo-Me is aiming to become a European leader and plans to install 100 machines per month by 2023. It is also aiming to become the leading French vending equipment maker by 2023.
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