Morgan Sindall share price has had a difficult performance in 2022 as the cost of doing business rose. MGNS stock dropped to a low of 1,335p on October 24, which was about 50% below its highest point this year. It is trading at 1,600p, which is about 20% above the lowest level this year, giving it a market cap of over £750 million.
High costs hurt profitability
Morgan Sindall is a leading company in the construction and regeneration industries. It operates several brands like Morgan Sindal Construction, Morgan Sindal Infrastructure, BakerHicks, Property Services, Morgan Lovell, and Overbury. Its regeneration business brands are Lovell and Muse Developments. Some of its top projects are A41 improvements, Heathrow Airport, and Welsh Water.
Morgan Sindall share price has been in a downward trend this year as the company’s cost of doing business has risen. As an infrastructure company, Sindall has had to spend more money on energy, wages, and other construction inputs.
Still, the company’s business has done well this year. Its total revenue in the first half of the year rose from £1.55 billion in 2021 to £1.69 billion in 2022. Its operating margin narrowed slightly from 3.5% to 3.4% while its profit before tax jumped slightly to £54.6 million.
Most of the company’s growth came from its urban regeneration business whose revenue soared by 85%. Its fit out segment saw its revenue rise by 20% while property services grew by 10%. Construction and infrastructure declined by 1% to £764 million. The firm has about £264 million in cash, down from £294 million in the same period in 2021.
A key concern for Morgan Sindall share price is that the British economy is expected to remain in a recession for a while. At the same time, Rishi Sunak’s government has announced that it will reduce its infrastructure spend in the coming years. As such, the firm could see weaker demand for its infrastructure contracts.
Morgan Sindall share price forecast
The daily chart shows that the Morgan Sindall stock price crashed to a low of 1,335p in October. Since then, the stock has staged a strong recovery and managed to move above the 25-day moving average. The Relative Strength Index (RSI) has been in a bullish trend. A closer look shows that the stock has formed a small inverted head and shoulders pattern. It is also exiting the Ichimoku cloud level.
Therefore, the stock will likely continue rising as buyers target the next key psychological level of 1,800p. The stop-loss of this trade will be at 1,550p.
