Top Decile Stock reporting today...

...which is XP Power, a stock I have written up a few times in the past year. They remain in the top decile of the Compound Income Scores with a score of 96. The results were in line to slightly ahead of expectations with earnings and dividends coming in at 101p (+6%) and 61p (+11%) versus forecasts of 100p and 60p. This was on the back of order intake which was up by 6%, in constant currencies, to a new record and they now design 66% of their products themselves. Their operating margins also increased from 23% to 24.2%, and they generated cash such that they had £1.3m net cash versus £3.5m of debt at the previous year end.

On the outlook the chairman said: "While the global economic outlook again looks mixed in the year ahead, we believe we can grow our revenues as the new designs won in 2014 and prior years enter production. We also plan to invest in additional sales and engineering resources in North America during 2015 to help drive further growth. We enter 2015 with a strong balance sheet having closed 2014 in a debt free position. This places us in an excellent position to make bolt on acquisitions to further broaden our product offering and engineering capabilities."

Summary & Conclusion:
Another good set of numbers and steady delivery from this one which has under performed in share price terms over the last 12 months as it has de-rated from a fullish rating back then and as smaller companies in general have struggled.

This has left it looking reasonable value on around 14x P/E but the dividend yield of 3.8% based on this years dividend just announced and a decent earnings yield of 8.5% gives it a value score of 84 in the Compound Income Scores, which remember mostly excludes zero yields and is based on those two metrics.

As a result I'm happy to run with this one on value and yield grounds as they seem to be making good progress having invested in the business. They also seem confident about the future and their strong balance sheet gives them scope to invest or acquire for further growth, although of course nothing is guaranteed. Brokers seem to be forecasting some growth for the coming year of around 5%, so hopefully we'll see a continuation of their growth trend, albeit probably at a slower rate than in the last 5 years when they have achieved 20%+ growth in earnings and dividends.

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