How much longer can AEO be ignored?

AEO (Aeorema Communications) released their full year results this morning:-

https://londonstockexchange.com/exchange/news/market-news/market-news-detail/AEO/13857561.html

I've written about this company before. Here is my last blog post from around the same time last year:-

http://michae1mouse.blogspot.com/2017/11/update-aeo-no-brainer-now-surely.html

Since that time the share price has largely remained unchanged, but the company is making excellent progress. Undervalued/unloved stocks can be ignored for very long periods, but in my experience it's always worth the wait in the end.

In my last blog post, I said AEO was undervalued. Following today's results I'd suggest it's even cheaper.

This morning they recorded a 16% leap in revenues to £4.8m (2017:£4.16m) and a profit before exceptional items of £289,650, a year-on-year increase of 17% (2017: £248,368).

They maintained a strong cash position with £1,436,314 in the bank, and have proposed a final dividend payment of 0.75p (2017: 0.5p), up 50% on last year.

Taking the profit (post tax) before the exceptional items gives EPS of around 2.6p, and hence a p/e ratio of just over 10.

The exceptional items were in relation to the departure of its two founders, Peter Litten and Gary Fitzpatrick, from the board of directors.

The new management team are more focussed on growth than Litten and Fitzpatrick, and although they intend to keep paying dividends when possible, they will "use the cash reserves to invest in new talent capable of driving the business forward organically, as well as exploring new acquisition opportunities which can help the Group increase in scale and drive increased revenues and profits." 

They've certainly made an excellent start whilst maintaining a very healthy balance sheet boasting cash of £1.4m and remaining virtually debt free. 

The growth story moving forward is looking very promising indeed. The average growth in revenue from their top five clients this financial year was 29% and although some of their larger individual projects continue to be repeated every two to three years, they have added some new annual large-scale conferences to their calendar and continue to seek out repeating six figure revenue generating events to support their growth plan. They are especially pleased to report that their pitch to win ratio has increased by approximately 40%. 

Their outlook statement reads very positively:-

"Looking forward to the financial year ended 30 June 2019 and beyond the outlook is very positive. The strength of the new team has led to an excellent series of new business gains since the year end with both existing and new clients. These gains include a major new client in the technology sector and a new global brand within the media sector. The Group continues to win new film production projects and the appointment of Julian Staveley as Experiential Director is also proving successful, with the Group recently winning a roadshow event for a global electronics company."

Everything points to a company achieving excellent growth with a solid balance sheet, a forward p/e ratio in single digits and a respectable 2.7% dividend yield. At a market cap. of just £2.4m it's an opportunity to pick up a value company with very good growth prospects. Surely, AEO can't be ignored for much longer?

I am a shareholder of AEO, and no advice is offered or given in this blog.