LitComp (LIN) Is Undervalued, But Should You Buy?

Posted July 22, 2008

“With a share price of 45p and a market value of just £2.7m, LitComp is a real minnow, but what looks like a clear case of under-valuation is supported not only by broker Daniel Stewart’s forecast of earnings per share of 10.6p for the year to March 2009, but also by the fact that the business is strongly capitalised with net cash of £3m.” — Tom Bulford

by Tom Bulford

Baltimore — (TFN): There is nothing like being knocked off a bicycle by a passing car to change one’s attitude towards the compensation culture. This personal experience is one reason why Jason Smart, Managing Director of LitComp (LIN:London), is confident of the future of his small company that moved from Ofex to AIM in 2006.

With a share price of 45p ($0.90) and a market value of just £2.7m ($5.4 million), LitComp is a real minnow, but what looks like a clear case of under-valuation is supported not only by broker Daniel Stewart’s forecast of earnings per share of 10.6p ($0.22) for the year to March 2009, but also by the fact that the business is strongly capitalised with net cash of £3m ($6 million).

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Even in the current market conditions, this was enough to provoke a flurry of activity in the shares after the announcement of annual results last Wednesday, but there should be more to come.

First, though, let me address one item that arguably has been holding back the shares and does have a significant impact on financial projections. Read on to learn more.

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