Goals Soccer Centres is a good example of what can happen to share prices when a company disappoints investors on growth.
As the leading provider of branded five-a-side football pitches in Britain, with a 42% share of the market, five years ago its shares changed hands for 20 times earnings as investors became very bullish about its growth prospects. Now they trade on 9.6 times. But I think that at current levels they are well worth a look.
Goals's footprint has grown a lot. It has added 19 new football centres across Britain since 2008 and now has 43 of them. The trouble is that profits have not grown as quickly. In 2007, each soccer centre had an average profit before depreciation (EBITDA) of £500,000. In 2012, that figure was £377,000.
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Yet I see reasons to be optimistic. There is a solid business here. Five-a-side football remains a popular leisure activity, with Goals having 100,000 players using its pitches every week. It looks fairly good value too with each player paying around £5 (or less) for an hour's use of the facilities, depending on when they play.
What's encouraging is that the management has a plan to improve the returns of the business. Thankfully, it's not going to be building any more new centres and will concentrate instead on getting more out of its existing ones, generating cash and paying down debt.
Profit per centre has the potential to increase as newer centres are still reaching maturity. A three-year branding partnership with sports radio station TalkSport should also help build awareness of the business and get more people through the doors.
But what's most attractive about Goals now is the price of its shares. Trading at today's lower valuation, they price in little expectation of future growth. If management can turn this business around then the shares look worth a punt.
Verdict: speculative buy at 137p
