A tiny firm that should keep on growing

By Author Charlie Gibson Feb 20, 2006

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Despite its diminutive size (a market capitalisation of only £23.1m), specialist European patent and trademark attorney Murgitroyd (MUR:AIM, 279p) has generated a very decent return for investors (around 50%) since it was identified as “a solid company that is well worth investigating” by MoneyWeek in June 2005.

Current shareholders might be tempted to take some profits as a result of this recent outperformance, says Investors Chronicle, but they should resist. Official figures for 2005 are not yet available, but after years of stagnation, chief executive Keith Young expects top-line growth in the patent market in 2005 to be not far off the 10% seen in 2004.

He also anticipates that kind of market growth to carry through into 2006 as well, which means that companies such as Murgitroyd – which has historically been able to add value both organically and by acquisition – will be operating against an excellent background.

Murgitroyd shares currently trade on a multiple of 18.6 times prospective adjusted earnings. Ordinarily, that would not normally be considered unduly cheap. However, continued growth in earnings per share is destined to push the rating down to 15.3 times the following year, which is much more “reasonable”, given the company’s track record of growth. Buy.

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Published in Tips & advice | More articles by Charlie Gibson

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