Redcentric (AIM:RCN) - Share price, News & Analysis

RCN fundamental analysis
Snowflake Score
Valuation	4/6
Future Growth	1/6
Past Performance	2/6
Financial Health	5/6
Dividends	3/6

RCN Stock Overview

Redcentric plc provides IT managed services in the United Kingdom.

Rewards

Trading at 46.3% below our estimate of its fair value

Revenue is forecast to grow 9.08% per year

Became profitable this year

Risk Analysis

Earnings are forecast to decline by an average of 14% per year for the next 3 years

Unstable dividend track record

Large one-off items impacting financial results

Latest financial reports are more than 6 months old

Redcentric Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Redcentric
Historical stock prices
Current Share Price	UK£1.24
52 Week High	UK£1.49
52 Week Low	UK£1.08
Beta	0.24
1 Month Change	6.24%
3 Month Change	3.35%
1 Year Change	-11.79%
3 Year Change	58.13%
5 Year Change	47.02%
Change since IPO	37.22%

Recent News & Updates

Sep 03

Redcentric plc's (LON:RCN) CEO Compensation Is Looking A Bit Stretched At The Moment

CEO Peter Brotherton has done a decent job of delivering relatively good performance at Redcentric plc ( LON:RCN...

Aug 16

Redcentric's (LON:RCN) Earnings Are Of Questionable Quality

Redcentric plc ( LON:RCN ) announced strong profits, but the stock was stagnant. We did some digging, and we found some...

Shareholder Returns

	RCN	GB IT	GB Market
7D	-1.2%	0.8%	-0.4%
1Y	-11.8%	-18.9%	-4.0%

Return vs Industry: RCN exceeded the UK IT industry which returned -18.9% over the past year.

Return vs Market: RCN underperformed the UK Market which returned -4% over the past year.

Price Volatility

Is RCN's price volatile compared to industry and market?
RCN volatility
RCN Average Weekly Movement	3.7%
IT Industry Average Movement	6.8%
Market Average Movement	6.1%
10% most volatile stocks in GB Market	11.5%
10% least volatile stocks in GB Market	3.2%

Stable Share Price: RCN is less volatile than 75% of UK stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: RCN's weekly volatility (4%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1997	399	Peter Brotherton	https://www.redcentricplc.com

Redcentric plc provides IT managed services in the United Kingdom. It offers network services, including connectivity, software-defined wide area network, local area network, managed wide area network, secure remote access, and cloud managed wireless network services; and cloud services consisting of infrastructure as a service, hybrid cloud, colocation hosting, cloud migration, platform as a service, online data backup and recovery, managed hosted desktops, and disaster recovery services. The company also provides communication services comprising IP telephony, SIP trunks, unified communications, collaboration, call management and reporting, and call recording services; and IT security services, including network security, application security, identity and access management, network security monitoring and analytics, and distributed denial of service mitigation services.

Redcentric Fundamentals Summary

How do Redcentric's earnings and revenue compare to its market cap?
RCN fundamental statistics
Market Cap	UK£191.23m
Earnings (TTM)	UK£9.80m
Revenue (TTM)	UK£89.48m

19.5x

P/E Ratio

2.1x

P/S Ratio

Is RCN overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
RCN income statement (TTM)
Revenue	UK£89.48m
Cost of Revenue	UK£32.56m
Gross Profit	UK£56.92m
Other Expenses	UK£47.13m
Earnings	UK£9.80m

Last Reported Earnings

Sep 30, 2021

Next Earnings Date

Jul 21, 2022

Earnings per share (EPS)	0.063
Gross Margin	63.62%
Net Profit Margin	10.95%
Debt/Equity Ratio	1.4%

How did RCN perform over the long term?

See historical performance and comparison

Dividends

2.9%

Current Dividend Yield

57%

Payout Ratio

Valuation

Is Redcentric undervalued compared to its fair value and its price relative to the market?

Valuation Score

4/6

Valuation Score 4/6

Below Fair Value
Significantly Below Fair Value
PE vs Industry
PE vs Market
PEG Ratio
PB vs Industry

46.3%

Undervalued compared to fair value

Share Price vs. Fair Value

Below Fair Value: RCN (£1.24) is trading below our estimate of fair value (£2.3)

Significantly Below Fair Value: RCN is trading below fair value by more than 20%.

Price To Earnings Ratio

PE vs Industry: RCN is good value based on its PE Ratio (19.5x) compared to the UK IT industry average (32.4x).

PE vs Market: RCN is poor value based on its PE Ratio (19.5x) compared to the UK market (15.4x).

Price to Earnings Growth Ratio

PEG Ratio: RCN's earnings are forecast to decline next year, so we can't calculate its PEG ratio.

Price to Book Ratio

PB vs Industry: RCN is good value based on its PB Ratio (2.5x) compared to the GB IT industry average (3.8x).

Future Growth

How is Redcentric forecast to perform in the next 1 to 3 years based on estimates from 2 analysts?

Future Growth Score

1/6

Future Growth Score 1/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

-14.0%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: RCN's earnings are forecast to decline over the next 3 years (-14% per year).

Earnings vs Market: RCN's earnings are forecast to decline over the next 3 years (-14% per year).

High Growth Earnings: RCN's earnings are forecast to decline over the next 3 years.

Revenue vs Market: RCN's revenue (9.1% per year) is forecast to grow faster than the UK market (4.1% per year).

High Growth Revenue: RCN's revenue (9.1% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: Insufficient data to determine if RCN's Return on Equity is forecast to be high in 3 years time

Past Performance

How has Redcentric performed over the past 5 years?

Past Performance Score

2/6

Past Performance Score 2/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

24.5%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: RCN has a large one-off gain of £4.5M impacting its September 30 2021 financial results.

Growing Profit Margin: RCN became profitable in the past.

Past Earnings Growth Analysis

Earnings Trend: RCN has become profitable over the past 5 years, growing earnings by 24.5% per year.

Accelerating Growth: RCN has become profitable in the last year, making the earnings growth rate difficult to compare to its 5-year average.

Earnings vs Industry: RCN has become profitable in the last year, making it difficult to compare its past year earnings growth to the IT industry (26.7%).

Return on Equity

High ROE: RCN's Return on Equity (13%) is considered low.

Financial Health

How is Redcentric's financial position?

Financial Health Score

5/6

Financial Health Score 5/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: RCN's short term assets (£24.3M) do not cover its short term liabilities (£29.6M).

Long Term Liabilities: RCN's short term assets (£24.3M) exceed its long term liabilities (£17.3M).

Debt to Equity History and Analysis

Debt Level: RCN has more cash than its total debt.

Reducing Debt: RCN's debt to equity ratio has reduced from 36.4% to 1.4% over the past 5 years.

Debt Coverage: RCN's debt is well covered by operating cash flow (2127.1%).

Interest Coverage: RCN's interest payments on its debt are well covered by EBIT (7.4x coverage).

Balance Sheet

Dividend

What is Redcentric current dividend yield, its reliability and sustainability?

Dividend Score

2/6

Dividend Score 2/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage

2.91%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: RCN's dividend (2.91%) is higher than the bottom 25% of dividend payers in the UK market (1.8%).

High Dividend: RCN's dividend (2.91%) is low compared to the top 25% of dividend payers in the UK market (4.86%).

Stability and Growth of Payments

Stable Dividend: RCN has been paying a dividend for less than 10 years and during this time payments have been volatile.

Growing Dividend: RCN's dividend payments have increased, but the company has only paid a dividend for 8 years.

Earnings Payout to Shareholders

Earnings Coverage: With its reasonable payout ratio (57.2%), RCN's dividend payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its reasonably low cash payout ratio (30.5%), RCN's dividend payments are well covered by cash flows.

Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

3.5yrs

Average management tenure

CEO

Peter Brotherton (54 yo)

3.5yrs

Tenure

UK£672,000

Compensation

Mr. Peter James Brotherton has been Executive Director at Redcentric plc since November 28, 2016 and has been its Chief Executive Officer since November 22, 2018 and was its Secretary since November 28, 20...

CEO Compensation Analysis

Compensation vs Market: Peter's total compensation ($USD837.64K) is about average for companies of similar size in the UK market ($USD667.45K).

Compensation vs Earnings: Peter's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: RCN's management team is considered experienced (3.5 years average tenure).

Board Members

Experienced Board: RCN's board of directors are not considered experienced ( 2.1 years average tenure), which suggests a new board.

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/05/22 00:00
End of Day Share Price	2022/05/20 00:00
Earnings	2021/09/30
Annual Earnings	2021/03/31