LONDON -- Support services play Intertek (ITRK 2.25%) has continued to print spectacular earnings growth in recent years, as its diverse range of end markets and market-leading expertise has helped to build enviable resilience.
Although I believe Intertek has what it takes to remain on a relentless growth path, I believe a steadily rising share price means much of this projected expansion is already factored in at current levels, leaving little upside potential.
2012 marks another year of stellar growth
Intertek's full-year results released last week showed revenues leap an impressive 17% in 2012 to £2.1 billion, which in turn pushed pre-tax profits 19% higher to £308 million.
The firm -- whose network of 1,000 laboratories straddles more than 100 countries across the globe -- tests, inspects and certifies a wide range of products, including aeroplane parts, training shoes and children's toys.
This broad spectrum, across both traditional and emerging geographies, has helped the firm shrug off weakness in individual markets. The group's services also span a multitude of exciting industries with considerable structural growth prospects that I believe will underpin growth over the longer term.
Great growth prospects come at a price
Earnings per share growth of 13%, to 151p, is expected this year, according to City analysts. Growth is then projected to tick up slightly to 14% in 2014, to 172p per share.
Intertek has bucked the weakness in the wider economy to deliver excellent, double-digit earnings growth for a number of years now. And although I am convinced the company should continue to deliver yet more heady growth, at present price levels this expansion looks to be factored into the price.
The testing specialist currently trades on a forward P/E ratio of 22.8, and this is forecast to remain at an elevated 20.1 next year. And Intertek's high premium is borne out through its price/earnings to growth (PEG) multiple, which is estimated to remain well above the value-for-money watermark of 1 over the medium term -- readings of 1.7 and 1.5 are projected for 2013 and 2014 respectively.
And in spite of the firm's excellent dividend growth -- last year's 41p payout per share was up from 33.7p in 2011, and is predicted to rise to 47.7p and 53.8p per share this year and next -- Intertek still only offers a relatively low yield. Readings of 1.4% are expected in 2013 and 1.6% in 2014, well below the 3.5% FTSE 100 average.
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