When investors dived for cover during last year’s market crash, Halma had a better chance of maintaining its already expensive valuation — but now an exorbitant forward earnings multiple of 45, based on forecasts for next year, makes the safety equipment manufacturer’s shares ripe for correction at a time when inflation is rising at such a clip.
With hindsight, the fact that investors flocked to the FTSE 100 constituent last year was predictable enough. There is a reliability to its earnings stream and there are high barriers to entry, which have led to it generating a gross margin of between 63 per cent and 65 per cent for the past three decades. Since March last year Halma’s shares have risen by 87 per cent and
