The Smartgroup Corporation Ltd (ASX: SIQ) share price has been amongst the best performers on the market this morning.
At the time of writing the fleet management and salary packaging company's shares are up 4.5% to $10.55.
This brings Smartgroup's year-to-date return to an impressive 68%.
Why are its shares higher today?
This morning the company announced the $9 million acquisition of Fleet West Pty Ltd and provided the market with a trading update.
According to the release, Smartgroup will pay $8 million in cash and $1 million in shares to acquire the Perth-based specialist fleet management provider.
Fleet West manages around 2,800 vehicles for approximately 180 employer clients and expected to extend Smartgroup's fleet management presence further into the not-for-profit sector. It generated revenue of $3.5 million and EBITDA of $1.5 million in FY 2017.
Management expects it to continue its growth next year, contributing approximately $2.2 million in EBITDA during FY 2018.
Further to this, management advised that trading has remained strong since its last update and it expects to deliver NPATA of $64 million in FY 2017. This will be a 45% increase on the prior year.
Should you invest?
While I have been very impressed with Smartgroup this year, I would class its shares as a hold at the current share price.
I estimate its shares to be trading at approximately 25x FY 2017 earnings, which puts it at a significant premium to industry peers SG Fleet Group Ltd (ASX: SGF) and McMillan Shakespeare Limited (ASX: MMS).
As a result, I would suggest investors wait for a reasonable pull-back in its share price before considering an investment.
