Why Reliance Worldwide Share Price Rose 7% Today

What happened to Reliance share price?

Reliance Worldwide Corp Ltd [ASX:RWC] is up 7% at time of writing after posting strong first-half results.

Reliance provides water control systems and plumbing solutions for commercial and industrial applications. Reliance was popularised by its manufacturing push to connect plumbing fittings and specialist water control valves.

The Australian company was founded in 1949, and listed on the ASX in April 2016 at $2.87. It has been a bumpy ride since then. Overall, however, Reliance has thrived to a current price of $4.42, while paying dividends along the way.

What caused Reliance share price rise?

The company highlighted a strong 28.3% increase in net sales on the previous December period, totalling $362.6 million, which would have been 31.3% keeping currencies constant.

Reliance points towards large double-digit growth seen by its core stainless steel push to connect fittings ‘SharkBite’ as the main generator of this sales increase.

Net profit after tax was $41.5 million, a 17.5% increase from the half year ending December 2016.

This performance follows a similarly impressive FY17 with large international expansion including a strategic acquisition of HOLDRITE, another fittings supplier.

The company indicated that its full-year EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin would be above the 20% achieved for the full year in FY2017. It also noted that no specific margin targets are set due to uncertain market conditions because of long-term investing from the business.

The latter is an encouraging sign for longer-term investors, as it alludes to the focus on strategic goals rather than what is, at times, unsustainable short-term profit chasing.

A fully franked interim dividend will be available to shareholders, which at $0.035 is an increase of 16.7% over the previous 40% franked $0.03 payment.

Reliance pays out between 40–60% of NPAT (net profit after tax), with the remainder saved for growth.

Full-year EBITDA guidance was also raised by $5 million, with the expectation of continued growth from ongoing expansion of the push to connect the fittings business in the Americas.

Group CEO Heath Sharp said:

I am tremendously proud of what our global teams have achieved over the last six months. We have successfully launched a number of new products and completed several important projects.’

Sharp went on to describe the position the company is in to continue SharkBite sales growth and increase the distribution channels to support demand for their other products.

Reliance Worldwide Corporation has seen around 58% share price growth in the last 12 months, paying two dividends along the way.

Regards,

Ryan Dinse,                                       

Editor, Money Morning

and

Jack Cameron,          

Junior Analyst, Money Morning

PS: Looking for potentially solid investments to boost your portfolio this year? We’ve written a report on what we believe are the four best ASX stocks in 2018. Check it out here.


Ryan Dinse is an Editor at Money Morning.

He has worked in finance and investing for the past two decades as a financial planner, senior credit analyst, equity trader and fintech entrepreneur.

With an academic background in economics, he believes that the key to making good investments is investing appropriately at each stage of the economic cycle.

Different market conditions provide different opportunities. Ryan combines fundamental, technical and economic analysis with the goal of making sure you are in the right investments at the right time.

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