The share price of leading global registry company Computershare Limited (ASX: CPU) has underperformed the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) over the past year. While the index has gained 1.5%, Computershare has lost 1.5%. It's a situation which will be annoying for shareholders however it could also mean a buying opportunity…
The cause of the lacklustre share price performance is presumably at least partially due to an uninspiring first half result which saw a decline in revenues, earnings and cash flows, both compared with the prior half and the prior corresponding period.
Perhaps most surprising of all however has been the lack of support by the market for Computershare due to its exposure to US dollar earnings. Other global businesses such as Brambles Limited (ASX: BXB) and Amcor Limited (ASX: AMC) have seen their share prices surge around 18% and 41% respectively over the past 12 months, as investors have increased their exposure to businesses with global growth options in general and US dollar earnings in particular.
With approximately 43% of total revenues at Computershare coming from the USA in the half year to December 2014, many investors would have been expecting a currency tailwind and correspondingly more investor support for the stock price.
While the support has been left wanting, there are still reasons to remain positive.
Earnings growth
Earnings per share (EPS) are forecast to rise from 63.7 cents per share (cps) in financial year (FY) 2014 to 77.4 cps and 77.6 cps in FY 2015 and FY 2016 respectively.
Dividend growth
The outlook for dividends is also appealing. Having paid out 29 cps in FY 2014, Thomson Consensus Estimates suggest dividends will rise to 36.5 cps and 38.5 cps in FY 2015 and FY 2016 respectively.
Valuation
Based on the consensus forecast for EPS in FY 2016, investors currently have the opportunity to acquire shares in Computershare on a price-to-earnings multiple of approximately 16x. That arguably represents an appealing purchase price considering its relative pricing compared with the market.
