Is Clarkson PLC a better buy than Rolls-Royce Holding PLC and BAE Systems plc after results?

Does Clarkson PLC (LON:CKN) (CKN.L) have more upside potential than Rolls-Royce Holding PLC (LON:RR) (RR.L) and BAE Systems plc (LON:BA) (BA.L)?


Clarkson PLC (LON:CKN) (CKN.L) has released full year results for the 2017 financial year today. The company’s underlying profit before taxation increased by 12%, with it benefitting from early signs of recovery across shipping markets.

Dividend growth of 12% marks the 15th consecutive year of increases in payments made to shareholders. Its cash flow also improved, with free cash resources rising by 14%.

Looking ahead, Clarkson remains upbeat about its future prospects. It has seen early signs of recovery across its core markets, and it expects growth to continue since it is well-placed to benefit from growth opportunities.

In my view, the company’s performance in 2017 was relatively positive. Trading conditions have improved, but there remains some uncertainty about the medium term outlook. This may be reflected in investor sentiment towards the stock in the coming months, with there being the potential for a degree of caution from the market regarding the company’s valuation.

In the last year the Clarkson share price has risen by 33%. That’s a better performance than industrial sector peers such as Rolls-Royce Holding PLC (LON:RR) (RR.L) and BAE Systems plc (LON:BA) (BA.L). The BAE share price is flat, while the Rolls-Royce share price has risen by 22% during the same one year time period.

I feel that Rolls-Royce and BAE may offer greater upside potential than Clarkson at the moment. Their risk to reward ratios appear to be more favourable, and they could offer larger margins of safety. Therefore, I would expect their share prices to perform better relative to their industrial sector peer.

However, I’m still optimistic about the prospect of further growth from Clarkson. It seems to have a solid strategy and with its trading conditions continuing to improve, it could be set to deliver stronger financial performance. This may act as a catalyst on its share price over the medium term.

About Robert Stephens 3630 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email or use one of the other contact methods available on the 'Contact Us' page