DS Smith plc (LON:SMDS) (SMDS.L) has released half year results today for the six months to 31 October 2018. In my view, they show that the business has continued to make progress with the delivery of its strategy.
Revenue increased by 16% versus the same period of the previous year, with adjusted operating profit increasing by 32%. The company’s organic volume growth was 3.2%, with improving cost recovery reflecting its business mix as well as the strength of its business model.
It was able to deliver growth from FMCG and e-commerce leadership, while its US acquisition has been fully integrated and is delivering ahead of expectations. The Europac acquisition is expected to complete around the end of the calendar year.
DS Smith believes that it has structural drivers for growth, as well as a compelling commercial differentiation. It has experienced strong momentum during the first half of the year which has continued into the third quarter. It has been able to win market share, with the business optimistic about its future prospects according to today’s update.
In my view, the outlook for the business is relatively positive. It is expected to record a rise in EPS of 13% in the current year. This could help to catalyse investor sentiment to some degree, while EPS growth of 8% in the next financial year could do likewise.
A P/E ratio of around 8.5 suggests to me that the stock may be undervalued. Given its strong performance in the first half of the year and the potential for continued organic and acquisition-led growth, I’m optimistic about its long-term prospects.
Although DS Smith may not be a popular stock at the moment and could face a volatile period due to fears about the world economy, I believe that it could be a value investing opportunity. Therefore, I’m upbeat about its investment prospects after today’s results.