Polymer solutions firm Victrex (LSE:VCT) announced preliminary full-year results this morning. As a consequence, the Victrex share price has jumped in today’s trading so far. Should I buy the shares for my portfolio? Let’s take a look.
The Victrex share price journey
Victrex is a British firm that produces high-performance polymers with a range of real world applications. The polymers designed and manufactured by Victrex are used in smartphones, aeroplanes, cars, medical devices, and oil & gas operations. Victrex’s speciality is the well-known hard wearing polymers known as PEEK. It has advanced technology over the years to become a world leader.
As I write, the Victrex share price is 2,430p. The share price is up 3% today, from 2,354p at the beginning of trading. This is due to positive full-year results announced this morning. Over the past 12 months, the shares have returned 16%, rising from 2,082p to current levels. The shares are up 3% year-to-date.
FY results and outlook ahead
Victrex’s preliminary full-year results covered the 12 months ended 30 September 2021. The results made for excellent reading in my opinion. Group sales volume increased by 25% compared to last year which was to be expected due to heightened demand caused by reopening. Revenue and gross profit increased by 15% and 16%, respectively. The good results led to Victrex declaring a dividend of 109.56p per share. This is made up of a regular dividend and special dividend worth 50p. It is worth noting the dividend has surpassed pre-crash levels and gives Victrex a yield of 2.5%.
I can understand why the Victrex share price has jumped today based on such impressive results. The outlook ahead also seems promising. It reported good sales progress in all sectors as well growth plans. For example, progress has been made on one of its new manufacturing facilities in China. Victrex’s growth plans will be supplemented by a robust balance sheet. It can call on some of the £99.9m cash it has available.
Risks and my verdict
Despite the positive results, Victrex does have risks. Firstly, macroeconomic pressures could affect progress, growth, and performance. Rising inflation and costs could hinder margins and performance, especially if it cannot pass these rising costs on to its customer base. This could affect further dividends. Secondly, the pandemic halted progress in the past. New variants, such as the Omicron variant, could lead to a slow down of orders and growth.
Overall, the Victrex share price looks a bit expensive right now with a price-to-earnings ratio of 38. I do like the company and its place in its sector. It has also returned close to pre-pandemic levels of performance as well as paying a dividend that would make me a passive income. I would add shares to my portfolio if there were a better entry point to buy. For now I will keep a keen eye on developments.
Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended Victrex. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
