Organic growth and acquisitions

When managing a company decides to grow organically or through acquisition; they need to consider their strategy carefully. Organic growth increases the existing turnover of a company or brings profits generated within the company. Organic growth is the real growth for the company’s core. Is a good indicator of how management has used its own internal resources to expand profits. Organic growth also identifies if managers have used their skills to improve the business.

Compare this strategy for a company that has grown by acquiring other companies. Naspers continued the acquisition of last year’s trial, but due to limited opportunity this year, decided to grow organically. Managing Naspers believes that internet valuations have become bloated and good value is hard to come by. Acquisition growth, however, has even more advantages and is often considered an option faster and cheaper with less risk attached to it.

Into Reunert manages a number of electrical engineering enterprises, Office and services systems and defence electronics. Into Reunert is once again on the acquisition trail to raise revenue, which seems to have stagnated. The company wants to bring business into the fold as a way of completing the transformation of its communications unit. Seems inexpensive share trading on a PE of 11.1 times and 2.3 times the NAV. Therefore we recommend investors to buy the share. The share is backed by a historic dividend yield of 5%. The stock price is trading below its 200-day moving average and just above the moving averages 10 and 30 days. The trend is moving sideways with a downward bias. Wait for the withdrawal price and check before buying a change of trend.

Naspers is a multinational media group with its main operations in internet platforms, pay-TV and the provision of related technologies and print media. Based on the current market price, estimated that the Group’s operations, excluding its investment in Tencent (listed on Hang Seng) and ru (listed on the London Stock Exchange) is trading on a PE of about 3.5 times. These two investments currently comprise 93% of the market capitalisation of the Group and remain the main driver of future growth. We believe that the share is fairly valued and advises investors to keep their shares. Nasper price is trading above the moving average and the trend remains upwards, although laterally over the medium term. Waiting for the price to retest the level of support to R351, or for a breakout above resistance level to the R406, before buying.

For an investor, fast growth looks good, but companies can get into trouble when they grow too fast because they don’t keep such growth rates and their Share prices suffer. When evaluating companies with aggressive growth policies, investors should carefully determine whether these policies have more disadvantages than benefits.