Equity prospects

DIPLOMA

Michael Bray, Research Analyst

Price£16.47

52 week high-low£16.74—£11.44

Net yield1.6%

Hist / pros per32.0—25.9

Equity market cap£1,846

Diploma PLC is a holding company comprised of a number of international operating businesses. These specialise in the supply of consumable products and services into three distinct sectors and divisions for the Group: Life Sciences, Seals and Controls. 

Products sold into Life Sciences include equipment used in blood testing. Seals and gaskets used in specialised industrial equipment are examples of products sold by the Seals division. Whilst Controls includes the likes of specialised wiring supplied to the aerospace industry. Some of these products and services might sound mundane and/or unrelated, but Diploma’s track record of growing profits suggests it must be doing something right. 

By focusing on supplying products and services essential to the daily running of its customers’ operations, Diploma has been able to generate stable and growing revenues. The autonomy it allows its operating businesses to offer solutions that closely meet the requirements of their customers. And when combined with its responsive customer service customers typically stay sticky allowing Diploma to charge them a premium. 

For all its positives, Diploma is not immune from industrial production trends. If the global macroeconomic environment continues to deteriorate, Diploma’s profit growth will be negatively affected.

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