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Zero Growth for Renishaw

LONDON -- Renishaw  (LSE: RSW  ) lowered its guidance for year-end revenue growth from around 8% to 5% as sales were flat in the third quarter. The precision measurement company now expects profits before tax to be similar to last year's.

Despite some strength in the semiconductor market and a strong performance by the company's relatively small health care operations, which reported sales up 24% in the quarter, less demand out of the company's Far East region dampened the quarter's results and full-year expectations.

The sluggish growth in sales comes as the company is investing in future growth -- it has been building, refurbishing, and expanding its facilities for the past few years, and hired nearly 750 people in the last year -- which means higher costs and lower profits in the near term.

Even with the lowered expectations, Renishaw is expecting profit before tax to be in the neighborhood of 24% of sales -- a very respectable return. Investors will have to decide for themselves if they think that level of profitability and the company's longer term prospects justify a P/E in the high teens.

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9/23/2016 12:01 PM
RSW $2700.79 Down -2.21 -0.08%
Renishaw CAPS Rating: No stars