Nuplex Industries Ltd profit surges 39%: Should you buy?

NZ-based Nuplex Industries Ltd (ASX:NPX) has reported a profit of NZ$63.4 million.

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What: NZ-based polymer resins manufacturer Nuplex Industries Ltd (ASX: NPX) produces products that are utilised across industrial, performance and architectural coatings including the automotive and marine sectors.

Nuplex has just reported an impressive 39% uplift in underlying net profit after tax to NZ$63.4 million for the financial year ending 30 June 2015.

On an underlying per share basis this equated to a 36.4% improvement from NZ 21.7 cents per share (cps) to NZ 29.6 cps.

So What:

The profit result is impressive and reflects improvements occurring across the business including a strong contribution from the Europe, Middle East and Africa (EMEA) region, growth in the Asia region, gains in the Americas region and a turnaround in the Australia and New Zealand region.

Notably, returns on funds employed increased from 11.5% to 12.9% and net debt declined from NZ$231.7 million to NZ$139.9 million.

Now What: The stock has already gained 28.8% over the past 12 months and is up just over 50% in the past five years, which means it has substantially outperformed the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) over both time frames.

The board has declared a final dividend of 17 cps which is a substantial increase on the 11 cps paid in the prior year.

For the full year, dividends total 27 cps. Management has singled out Asia for its growth potential with a forecast that the region should deliver over 10% per annum earnings before interest, tax, depreciation and amortisation (EBITDA) growth over the next few years.

This forecast is based on the completion of a four-year capacity expansion program which Nuplex expects to lead to Asian sales increasing from US$245 million today to US$400 million by the end of 2018.

With a buy-back currently underway to repurchase 5% of the shares outstanding, coupled with the positive outlook for the group, an uptick in earnings per share (EPS) in the current financial year is highly likely.

Based on data provided by Morningstar, the consensus forecast suggests EPS should increase to 33.3 cps. With the stock gaining 3% this morning to $3.64, this implies a forward price-to-earnings ratio of around 11x.

Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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