The Codan Limited (ASX: CDA) share price has started the week strongly.
In morning trade, the metal detector focused technology company’s shares are up 10% to $7.41.
Why is the Codan share price rising?
The catalyst for the rise in the Codan share price on Monday has been the release of a trading update from the company.
According to the release, the company is expecting its record FY 2022 first half profit of $50 million to be matched in the second half of the financial year.
This would mean a record full year profit of ~$100 million for Codan, which represents a 56% increase on FY 2021’s profit of $64 million.
Though, this guidance does come with a warning. Management advised that the timing of project sales or unforeseen challenges in supply chains could still impact revenues and profitability as it approaches the end of the financial year.
What is driving Codan’s growth?
The release explains that this strong growth has been supported by its strategy to diversify revenues and profitability.
It highlights that the increased profitability of the Communications division has continued during the second half thanks to positive performances from the acquired DTC and Zetron businesses.
In addition, the company’s Minelab business is on course for its second-best year on record. But even better, management expects the business to form a new base from which it will grow in future years. This is being underpinned by continued penetration of new geographic markets and new product releases that will drive further market share increases.
Finally, Codan revealed that its inventory management has been successful. It explained that its “decision to invest in inventory rather than let customers down has proven to be the correct one.”
Notwithstanding its investment in inventory, this has led to $41 million of cash being generated from operating activities so far in the second half. This is a huge improvement on its operating cash outflow of $13 million during the first half.
The post Codan share price jumps 10% amid guidance for ‘record’ FY22 profit appeared first on The Motley Fool Australia.
Should you invest $1,000 in Codan right now?
Before you consider Codan, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Codan wasn’t one of them.
The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
*Returns as of January 13th 2022
More reading
- Where I’d invest $10,000 into ASX shares this week
- If you’d invested $10,000 in Appen shares 7 years ago, lucky you! Here’s what you’d have now
- Buy these ASX growth shares in May: experts
- The IAG share price has tumbled 27% in 5 years. Have the dividends been worth it?
- Is the Westpac share price the cheapest in the bank sector today?
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
from The Motley Fool Australia https://ift.tt/nxI9wNc
Leave a Reply