Styles & Wood Group - Breakout?

Styles & Wood group (FTSE Fledgling: STY) closed at 13.25p yesterday but looks set to break out from its downtrend which started at the beginning of January.

STY provides property services to major retailers, banks and commercial organisations and has had a tough time in recent years as the long term price graph shows (see below).

As you can see, a drop from £43.05 (11th April 2007) to 11.00p (9th December 2010), a fall of £42.94 (-99.7%) is fairly desperate!

However, lets go in a bit closer and take another look at the recent price action...

The graph above, covering the last 18 months or so, shows how STY is beginning to show signs of life. The first signs of a break came in December 2010, when the share price shot up from 11.25p to 17.75p (a rise of 61.4% in 26 days). This rise wasn't sustained however and STY has been steadily declining so far this year.

In terms of fundamentals, STY is reasonably well placed. Some of the key facts from the preliminary results for the year ended 31st December 2010 (announced on 13th April) are:

• Revenue £99.1m (2009: £139.3m)
• Underlying operating profit £1.4m (2009: 1.8m)
• Net Loss £0.9m (2009: Net Loss £1.7m) - reduction of 47%
• Gross Margin 7.8% (2009: 6.4%)
• Net cash £7.5m (31/12/2009: £8.4m)
• MCAP - £7.88m

So, we have a company valued by the market at £7.88m with net cash of £7.5m, effectively meaning that the price being put on the ongoing debt free business is £380,000! For a business that, from recent news seems to be very clearly in recovery, this seems a bargain.

Looking at the price action since 13th April is worthwhile (see the daily chart below).

The price action yesterday seems to me to be a clear buy signal. The 14 day ADX indicator gave a buy signal (foretold by the 8 day ADX a couple of days ago). OBV has picked up nicely since the results were announced and the 200 day moving average is nicely flat. Volume has also been picking up nicely, suggesting we are in a period of accumulation.

Interestingly, as I'm completing this blog post, I've just checked the shareprice of STY to see that it's jumped this morning (currently: 14.5p at 12:55, Wednesday 27th April). One to give serious consideration to?

I'd be interested to hear your views on the prospects for STY.

Usual warnings - Do your own research etc...