CSR Limited sinks 7% after results release – have the easy gains already been made?

The results were good but it may already be reflected in the share price.

Shares in CSR Limited (ASX: CSR) have sunk 7% to $3.27 after the building materials company released its full year results for the year ending 31 March 2014.

Trading revenues grew 4% to $1.75 billion versus the previous year thanks to higher volumes in the building products division. The tailwind of a booming property market helped the group post an 80% rise in earnings before interest and tax (EBIT) to $126 million.

While the headline numbers look good, it appears the results have failed to inspire investors with the stock falling around 7% by early afternoon.  Perhaps investors are thinking that this is as good as it gets for CSR….

Here’s a closer look at the results

  • The building products division increases EBIT by 20% to $93 million
  • The poorly performing glass division, Viridian, reigned in losses from nearly $40 million to $15 million
  • Earnings from the Aluminium division were reasonably steady, contribution $52 million to the group
  • Property EBIT rose to $17 million  from a break-even result last year

The much improved results correspond to earnings per share of 14.2 cents (pre significant items). This equates to a price-to-earnings multiple of 23 which would appear to be a reasonably full multiple to pay at this point in the cycle.

An investment in CSR, Boral Limited (ASX: BLD) or any other highly priced property play means you’re taking the view that there is a very strong construction boom ahead.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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