Halma shares surge on outstanding results. But is there trouble ahead?
Shares in FTSE 100 industrial technology conglomerate Halma (LSE:HLMA) jumped 8% this morning (12 June) as the company released its full-year results. And it’s not hard to see why.
The report was – in my view – stellar across the board. But there’s one particular nuance that I think is important and investors should be careful not to overlook.
The results
The headline news for investors is that Halma’s revenues grew 11% in the company’s 2025 financial year. And earnings per share were up 14% on an adjusted basis.
Beneath the surface, the rest of the report also looks very good. The majority of the firm’s impressive revenue growth was organic, rather than driven by acquisitions.
On top of this, returns on total invested capital – a key measure of how well Halma reinvests its cash – increased from 14.4% to 15%. That’s also a very positive sign for the FTSE 100 company.
In terms of the year ahead, management expects organic revenue growth to be in the high single digits, supported by strong margins. Given all of this, it’s no big surprise to see the stock going up.
What’s the catch?
In terms of potential risks, I think there’s one big thing that investors need to pay attention to from Halma’s report. But it’s not a negative point about the company from a business perspective.
Because of when the firm’s financial year finishes, the results only cover the period up to the end of March – and a lot has happened since then, starting with the ‘Liberation Day’ tariff announcements.
That’s not a criticism of Halma in any way. But investors should be aware that the next set of results will involve a much more volatile trading environment, which could be more challenging.
The company’s guidance is positive, but with 44% of sales coming from the US, investors would be unwise to ignore the risk. And that’s something to keep in mind when processing the latest results.
Buying Halma shares
I think Halma is a terrific business and the stock market seems to agree. But I have a slightly unusual view about its strengths and weaknesses and I’m looking to use this to find a buying opportunity.
A lot of investors see organic growth as preferable to acquisitions and I understand why. Buying other businesses can be risky if things don’t go according to plan.
Despite this, I don’t think organic growth is automatically better. I much prefer to see the company taking advantage of the best opportunities available, whatever they might be.
As long as returns on total invested capital remain high, I don’t really mind where the growth comes from. And this might be what creates an opportunity for me in the future.
Staying disciplined
Halma shares have historically come under pressure when organic growth has faltered. But I think the market as a whole has a tendency to overreact when this happens.
The latest report is very strong from this perspective and the stock is up as a result. So I’m minded to be patient and stay disciplined for the time being.
But I might not have long to wait. If the tariff uncertainty that’s been in the news since April weighs on Halma’s next report, I could be in business in the near future.
The post Halma shares surge on outstanding results. But is there trouble ahead? appeared first on The Motley Fool UK.
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Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Halma Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
