ACSO – declining ROCE

ACSO makes queuing systems for theme parks. As at 15-Sep-2015, Paul Scott noted that he had a long position in the company (http://www.stockopedia.com/content/small-cap-value-report-15-sep-2015-acso-snty-hydg-106480/). There was important news that they won a major contract with the theme park operator MERL (Merlin Entertainments).

Momentum is strong for this company. At a PE of 24, it is expensive.

There are a lot smarter folks who are bullish on this company. I know nothing of the business model of this company, but I do note the following: its operating margins are not particularly high, and its ROCE and ROE comes in at 5.2%.

Actually, the ROCE for the company has been steadily declining, from 42.2% in 2009. It made two hefty acquisitions in 2013 and 2014, raising some debt to do so.

Maybe the numbers are being distorted by the acquisitions, and we need to wait until the growth shows up. However, the EPS figures have been flat for the last 6 years, and the numbers are showing that the ROCE is declining steadily. Not a great sign; but I can think of ways that this will prove to show a good return nevertheless.

Very curious. I shall follow this up in a year’s time and see how it has fared.

788p
ASX 3526

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About mcturra2000

Computer programmer living in Scotland.
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