James Gard: Welcome to Morningstar. Our latest stock of the week is Smiths Group, which has nothing to do with WHSmith, crisps or the iconic Manchester indie band. Smiths is an engineering company, but it has a diverse portfolio range with safety at its heart. Its products can be found in airport scanners, jet engines, apartment blocks and even NASA's Mars Rover. Customers are companies like Shell and Exxon rather than you and me.
Our analysts think that Smiths Group is a collection of industry-leading niche businesses, each producing admirable margins and returns. We also assign the company a narrow economic moat. Smiths Group has just put out annual results. Organic revenue rose of its highest rate in nearly 10 years, beating expectations, but profits fell 57% to just over £100 million because of rising costs. Shares have been relatively stable in the last year despite the wider market turbulence. They trade below their fair value of £16.90 and they yield around 2.5%, and indeed, Smiths has just increased its annual dividend by 5%.
For Morningstar, I'm James Gard.