A measure of how frothy the stock market has become is that Kingspan, with the share up to the €19 level recently, is trading on a p/e of 30 based on 2104 earnings. The stock has met resistance at that price though the current situation is quite a gain from the €12 level the share was trading at in October 2014. The yield attraction would appear not to be a factor; the full year dividend of 16.25c for 2014 would deliver a yield of 0.9% if you buy now. What has investors interested is the growth momentum after the groups’s biggest every buy is bedded in.

The manufacturer of insulation panels and insulated boards has paid €315m to acquire Joris Ide, a pan European manufacturer and supplier of insulated panels. Flor O'Donoghue, analyst at house broker Davy, expects that Kingspan’s revenues now could get to around €2.75bn in 2016, growth which she describes as “significant shift” from turnover of €1.9bn in 2014. Trading profit is forecast by Davy to be around €195m compared with €149m in 2014, with earnings per share expanding to 85c for 2015 compared with 63c last year.

Such an outcome would place the forward p/e multiple at around 21, which means the stock isn’t cheap at current levels. To acquire JI, Kingspan paid around nine times EBITDA. When the Kingspan share is at €18, the market’s EBITDA multiple for Kingspan itself is 16.4. So investors believe that CEO Gene Murtagh will effect large scale integration efficiencies at JI, and also at Vicwest in Canada, another company in the process of being acquired for €120m.

With Joris Ide, O’Donoghue sees potential scale gains in areas such as raw material purchases, and a better market position for the group in the Benelux and France markets. “As with any large transaction, there are risks,” she cautions. “However, we believe Kingspan has enough experience in this area at this stage that it should be able to deal comfortably with integrating.”

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