Why the GUD Holdings Limited share price has rocketed higher today

GUD Holdings Limited (ASX:GUD) shares rocket on the release of its half-year result. But is it best avoided?

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The shares of GUD Holdings Limited (ASX: GUD) have rocketed higher in morning trade following the release of its half-year result. At the time of writing the retail conglomerate's share price is up over 7% to $10.41.

I'm quite surprised to see its shares rally so strongly, as I can't help but feel the result is not as great as it first appears.

Although the company headlined with underlying net profit after tax growth of 26% to $24.7 million on last year's reported result, on a like-for-like basis (following the sale of the struggling Sunbeam and Lock Focus businesses) that growth reduces to just 8%.

Once again it has been GUD's Automotive business which saved the day with a 10% jump in sales thanks partly to new product launches.

Elsewhere the company's Davey, Oates, and Dexion businesses all posted a reasonably significant drop in sales.

It was a similar story on the bottom line as well with the Davey and Oates businesses each posting a 34% drop in earnings before interest and tax (EBIT).

As a water-related products business, Davey was adversely affected by the prolonged cold and wet spring weather.

Whereas its Oates cleaning products business took a hit due to the closure of Masters stores and the withdrawal of its product range from Woolworths Limited (ASX: WOW).

Overall underlying EBIT from continuing operations increased just 1% on the same period last year to $39.1 million.

However, managing director Jonathan Ling is optimistic that the company's trading performance will improve in the second half. He has reaffirmed full-year guidance of underlying EBIT of around $85 million.

Judging by its first-half performance, I'm not hugely confident the company will deliver on its guidance.

Because of this I would suggest investors avoid GUD Holdings for now and consider industry peer Bapcor Ltd (ASX: BAP) as an alternative.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of Bapcor. 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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