An activist believes that the price of the shares of the Smiths group is too low. These results of the first half can show why

Smiths group (LSE: SMIN) registered a 9.5% leap in the operational gain of the first half holder on Tuesday (March 25), but the price of the shares did not do much in response.

While I write, we are seeing an increase of only 1.6% in the day. But Smiths shares have risen 22% in the last 12 months and 81% in five years.

Pressure to move

The global engineering firm has been under pressure to consider a movement to the list in the New York stock market. The engine capital of US activist investors has been urging that a possible way to maximize the value of shareholders. And the actions that quote in the United States often have higher valuations in profits (p/e) than their rivals in the London sector.

In a recent interview with ReutersCEO Roland Carter said: “We never say. We have been listed for more than 110 years in the London Stock Exchange. So … we intend to remain an FTSE 100 company for now.“

But this new update of results seems to be heavy on the value of shareholders. As an example, Carter also said: “Our solid cash generation allows us to continue investing in the business … without being able to distribute significant capital to shareholders. We believe that this will offer a substantial value creation. “

Strategic change

The company reminded us “Strategic actions to unlock a significant value announced in January“, Adding that”Separation processes for Smiths interconnection and Smiths detection“They are underway. These divisions are involved in electronic component supplies and the airport luggage exam.

The approach will now be in “High-performance industrial technology companies by John Crane and Flex-Tek with significant opportunities to improve growth, improve the financial profile and deliver strong returns. “

Smiths Group is clearly going through a moment of transition. And I think this activism of investors possibly has a slightly shaken board. But does action really seem undervalued?

Valuation

That increase in operational gains came from an increase of 6.7% in income. And in the final result, 55.5p, an increase of 14%was translated into action (EPS). Again, this is a non -standard title. Assuming that he doubles throughout the year, we would be looking at a 18 -year -based P/E based on the previous closing price of the shares.

The use of the EPS legal figure of 48.8P would take the P/E to a little more than 20. And that is largely with 21 -year -old analysts for the current year. They also see it fall as low as 16.5 by 2027.

That is obviously not cheap compared to the long term Ftse 100 average. But for a company with strong growth in card gains might seem weak. Then, compare that with the typical P/E values ​​for similar companies in New York … and I think I'm starting to see what this engines capital investor is about.

What follows?

I feel that the uncertainty resulting from this ongoing transition could maintain the price of the shares down for some time. Even so, analysts have an objective consensus price of 2,300p, 13%more. For investors who understand long -term perspectives, Smiths could surely be worth considering in today's assessment.