Zero Growth for Renishaw
LONDON -- Renishaw lowered its guidance for year-end revenue growth from around 8% to 5% as sales were flat in the third quarter. The precision measurement company now expects profits before tax to be similar to last year's.
Despite some strength in the semiconductor market and a strong performance by the company's relatively small health care operations, which reported sales up 24% in the quarter, less demand out of the company's Far East region dampened the quarter's results and full-year expectations.
The sluggish growth in sales comes as the company is investing in future growth -- it has been building, refurbishing, and expanding its facilities for the past few years, and hired nearly 750 people in the last year -- which means higher costs and lower profits in the near term.
Even with the lowered expectations, Renishaw is expecting profit before tax to be in the neighborhood of 24% of sales -- a very respectable return. Investors will have to decide for themselves if they think that level of profitability and the company's longer term prospects justify a P/E in the high teens.
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The article Zero Growth for Renishaw originally appeared on Fool.com.Nate Weisshaar has no position in any stocks mentioned. The Motley Fool recommends Renishaw. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.