Needs to keep re­sults go­ing

Finweek English Edition - - MARKETPLACE -

Clicks posted great re­sults with re­turn on eq­uity (RoE) at an eye-wa­ter­ing 53.1%; and the com­pany is very cash gen­er­a­tive. That said, I would have liked to see a lot more seg­men­tal in­for­ma­tion be­tween the re­tail and United Phar­ma­ceu­ti­cal Dis­trib­u­tors in­di­cat­ing the dif­fer­ent mar­gins. The chal­lenge Clicks has is that this is not a cheap share with the price-to-earn­ings mul­ti­ple (P/E) sit­ting around 24 times. Now, any qual­ity stock on the JSE is ex­pen­sive and has been for a while now, but di­luted HEPS growth of 15.1% with a 24 times P/E is light. It means Clicks needs to con­tinue de­liv­er­ing great re­sults to jus­tify the share price. Any slip in earn­ings will see the price un­der se­ri­ous pres­sure. This is not a rea­son to sell as the man­age­ment team has con­sis­tently proven it­self, but it does add some ex­tra risk.

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