Companies: AXO   

Though its share price has dropped dramatically from a 52-week peak of 928.5p, Axon, the business transformation play and the world’s largest independent SAP consultancy, remains a favourite among City analysts.

Under the leadership of chief executive Steve Cardell, Axon’s recent history has been one of strong cash generation, margin enhancement, reduced exposure to its biggest clients and the successful integration of acquisitions. Operating in the UK, the US, Canada, China, India, Singapore and Australia among other regions, Axon has just further fortified its supply chain solution skills through the acquisition of SCM, a supply chain SAP consultancy in the US, funding the $14m (£7m) deal in cash.

This transaction comes hot on the heels of May’s acquisition of EnterSys, a provider of SAP consulting services to the North American oil, gas and chemical sectors. Cardell says Texas-based EnterSys, another cash deal totalling up to £12.5m, will help Axon expand in the energy sector.

Axon’s forecasts for December 2008 point to strong pre-tax profit growth to £38.4m (2007: £29.5m), on turnover increased to £240.8m (2007: £204.5m). For 2009, the market expects a further rise in profits to £41m. Based on estimated earnings of 41.32p and 44.39p, income-yielding Axon trades on prospective multiples of only 11 and 10.2, a rating we consider to be unjustifiably low. Buy/hold.

Save 50% off your first year’s subscription to Growth Company Investor magazine, and gain immediate access to all the recommendations online. Click here.

Axon Group	LSE	£390.02m	606.50p	-1.50p
Click here for interactive charting
Other company articles:
Axon Group			03/07/2008
Build your defences			05/10/2007
Sky is the limit for Axon			28/09/2007
Axon			20/01/2005
Axon			08/09/2004