HALMA (HLMA) £22.77

Gain to date: 9%

Sometimes the market is hard to please. On 15 June, life-saving technology company Halma (HLMA) reported its twentieth year in a row of record full-year profit and its forty-fourth consecutive year of growing the dividend by 5% or more. However, the share price has since fallen by 6% over the space of three trading days.

Admittedly, we’re still 11% ahead of our October 2022 entry price of £20.91, but it’s worth exploring why the shares have fallen of late.

WHAT’S HAPPENED SINCE WE SAID TO BUY?

It was a busy year for the company, ploughing close on half a billion pounds into a handful of bolt-on acquisitions. Historically, Halma has generated enormous value from such deals.

In that regard, Halma’s commentary that it has a ‘healthy acquisition pipeline across all sectors’ should infuse shareholders with plenty of confidence for the company’s future, now being led by Marc Ronchetti after Andrew Williams’ near two-decade run, only the company’s fourth chief executive in 50 years.

Halma believes it has a ‘highly sustainable’ growth model, based on long-run trends to create a cleaner, greener, safer world for future generations, and that’s been the case for years.

Berenberg analyst Calum Battersby attributed last week’s share price sell-off to weaker than expected margins in the safety division and upgraded guidance on interest costs. ‘However, we see neither issue as meaningful,’ he added. Safety margins are expected to improve this year and recent acquisitions are expected to generate margins well above the group average.

WHAT SHOULD INVESTORS DO NOW?

Analysts expect earnings to grow around 9% in the current financial year to 31 March 2024, and set against that expectation, the forward-looking price to earnings multiple stands at 28. That might look full to some investors, yet it is on the low side of historic valuations for Halma, based on Koyfin data.

It’s worth noting the stock price remains 29% off the previous £32 high achieved in December 2021. Keep buying shares in this fantastic long-run growth company.

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