One UK share I personal has soared recently, with the price going up 29% in lower than a fortnight. But it nonetheless trades for pennies and appears cheaper than US rivals on a price-to-sales ratio.

I just lately topped up my holding a bit by shopping for some extra shares. Under, I clarify why.

Troubled historical past

The UK share in query is S4 Capital (LSE: SFOR). Though headquartered and listed in London, the primary marketplace for the digital promoting company community is definitely North America.

Though the latest price motion has been constructive, on a long run perspective, S4 has achieved horrendously. The share price has halved up to now yr alone and is down 63% over 5 years. Even worse, it’s down 93% since a 2021 excessive.

What went flawed – and is the price a doable discount if it will get mounted?

Tons to show

The share price collapse has been a mixture of various components. S4 all the time divided opinions within the Metropolis and when it repeatedly delayed publishing its accounts a few years in the past, it badly damage in a repute.

The corporate has carried out new accounting controls since then and vowed by no means to have a repeat of the episode. However the reputational injury lingers.

The digital market has seen some demand declines within the present financial setting, with internet revenues within the first quarter declining 15% year-on-year. Web debt topped £200m, at an organization with a market capitalisation of simply £345m.

In the meantime, the enterprise stays lossmaking, though final yr’s post-tax lack of £6m was an enormous enchancment on £161m the prior yr.

Director shopping for

Add into that ongoing dilution as the corporate points shares as a part of previous acquisitions and the S4 funding case seems to be troubled at finest.

For a very long time, administrators didn’t purchase any extra shares utilizing their very own cash even because the price crashed, though in equity director shareholdings remained substantial.

Prior to now few weeks although, two administrators have stumped up their very own money to extend their holdings.

Cautiously optimistic

Administrators can misjudge share costs, like everybody else. However having held off shopping for any extra shares myself with out that vote of confidence, the director offers made me look once more at S4.

The primary quarter seemed weak, however the firm has persistently stated it expects issues to be stronger within the second half of the yr. Web debt ought to begin to fall as funds for historic acquisitions cease falling due, leaving the corporate free to purchase again extra of its shares and probably provoke a dividend.

Whereas demand stays subdued, S4 has a robust providing as is demonstrated by its roster of blue-chip shoppers spending thousands and thousands of kilos every with the corporate a yr.

Clearly, there are dangers right here. Nonetheless, I feel they’ve been priced in and, on the present stage, I reckon this UK share provides probably sensible long-term worth.