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magazineWhy Hill & Smith’s share price has fallen too far
Hill & Smith (HILS) £14.12
Loss to date: 7.1%
Original entry point: Buy at £15.20, 20 May 2021
It’s been a disappointing start to 2022 for road safety engineer Hill & Smith (HILS) with more than a year’s worth of share price gains wiped out.
Most of the damage was done in early January when news came that the UK Government would temporarily halt the rollout of new smart motorways. These use the hard shoulder as an extra lane during peak traffic periods, but a series of serious collisions and fatalities have raised safety concerns and sparked a full investigation of their suitability.
What may puzzle investors is why Hill & Smith’s share price should collapse by 25% when the company earns barely 2% of its annual revenue from smart motorway builds.
Last year’s group operating margins returned to management’s long-run 12% to 15% range (12.2%), a stark recovery from 2020’s 10.6% despite rising staff and raw materials costs.
The medium-term outlook for UK roads activity ‘remains positive’ according to broker Numis, with additional opportunities in the US and France. This could mean a sharp share price recovery once markets regain stability.
SHARES SAYS: We believe Hill & Smith remains an attractive long-run growth and income investment. Stay positive.
Important information:
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
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