back in November we were concluding that the then results were good but not spectacular and now we have more very good results and what is spectacular is the near 20% rise in the share price. This surprising really since the organic growth is up to 15% which is good but not amazing for a share which yields almost nothing,and has a very high P/E. I am certainly not grumbling but we all need to bear in mind that this is not a value share but a high growth share and where any slip would be punished severely. It is in the right place at the right time and looks like continuing to be so. They will need to keep investing in the high tech developments like AI/facial recognition etc. to keep up the momentum.
Today Im looking at two growth stocks in the technology sector. Shares in both companies have risen by 50% or more over the last year, but I believe these businesses could continue to grow as their core markets expand.
Shares of identity data specialist GB Group (LSE: GBG) rose by 12% in early trade this morning, after the technology group said that full-year results would be ahead of consensus forecasts.
Adjusted operating profit for the year to 31 March is expected to rise by 53% to £26m, while revenue is expected to be 37% higher at £119.7m. Despite a number of acquisition-related payments during the year, net cash rose from £5.2m to £13.4m.
Identity data services are increasingly important for many businesses. GB aims to meet these needs by combining trillions of data records relating to peoples identity. It then makes this data available to more than 15,000 clients in 71 countries. The firms services are mainly used for fraud protection, marketing intelligence and employee screening.
Theres more to come
Shares of this fast-growing firm arent cheap. But its operating profit has risen by an average of 33% each year since 2012, and its expanding into a fast-growing market.
GB Group is now a £700m business. I believe further growth is likely, especially as the new General Data Protection Regulation (GDPR) regulations have created a substantial extra compliance burden for many businesses this year.
Analysts are forecasting earnings growth of about 15% for the 2018/19 financial year. This leaves the stock on a forecast P/E of about 30, with a dividend yield of just 0.7%.
This valuation doesnt leave much room for disappointment, but I believe earnings are likely to continue growing over the next few years. Id rate the shares as a growth buy.
A huge jump today (14%+ at the moment) after some excellent figures for 2017/18 and GBG look poised to benefit from new General Data Protection Regulation (GDPR) regulations that kick in next month. Some companies are running scared of fines of up to £20million if their compliance procedures are not fit for purpose and GBG can assist with secure holding of centralised accurate global client data.
Nice article from Motley Fool suggesting strong growth ahead:
I agree. By any normal standards the increases in both revenue and profits are very impressive, but, of course, these had been built into market expectations. A large, non cash depreciation of intangibles did not help. GB is in the right place at the right time but will need to invest heavily in technology such as facial recognition in order to maintain its strong position. I also agree, that it is a strong hold and possible buying at sub 400p which could easily happen
We know the market opportunities for GBG are there and we know they are taking many of those opportunities. Perhaps expectations have caught up with performance and that is why I suggest solid not spectacular.
Definitely a long term hold and possibly an "add" on any weakness.....say below 400p?
GBG GB Group............chart recovering from market general sell off. <b>They report next Tuesday</b>. If you look at last statement results were Very Strong. Brokers backing as well. They reported last time on 24th october, check the chart out for the rise after that date.
'GBG expects to report adjusted operating profit for the half year in excess of £10 million, an increase of over 90% on last year. This is ahead of half year expectations.'
<b>Chris Clark, CEO of GBG commented:</b>
"The performance of GBG since the beginning of April has been very encouraging. The PCA Predict acquisition completed successfully in May and the business has integrated well into the Group, giving us new growth opportunities. Looking forward to the second half, we again have high visibility (over 70%) of our full year revenues and continue to grow well in the UK and internationally."
<b>The Group intends to publish its half year results on 28th November 2017.</b>
BROKER UPGRADE TODAY......
GB Group broker views
Date Broker Recommendation Price Old target price New target price Notes
01 Nov 17 Peel Hunt Buy 441.75 467.00 515.00 Reiterate
Hope this is helpful. It's just my opinion based on what I think the chart is suggesting. This is always a balance of probabilities so my opinion can be wrong and other analysts may have differing views.
The SP has continued to fall fairly rapidly but, as I said back at the beginning of June, the share price had got way ahead of itself and that a further 10% fall would be a buying opportunity. I think we are reaching that point.
What is the new bid?? The fall was inevitable given the excessive rise beforehand coupled with a less than generous dividend and the fact that expectations had ran ahead of reality. Still an excellent company in the right place at the right time. A strong hold and a buy if the sp falls back 10% or more from here imho
Sp up again to-day, but I have begun to realise why the price is so high and why there is no logic to support it. There are a number of funds that normally focus on the big ticket shares like Shell/Unilever/Prudential etc. that have bought into GB The question is, why? It is because, imho, GB is unique in the market, is a must have share because of what the company does, and the fund managers herd like instincts make them petrified of not being in a company that they think could have an exploding upwards momentum and sp. On any normal valuation basis, the current level defies any logic but that happens in an overheated market. I just hope that the bubble does not burst.
agree I don't WANT to sell....think it's a good company with a good future, just don't want any one holding to become too large proportionately...esp given size of company and AIM listing.....just look what happened last ear for no great reason.
Well there does appear to be a bit of substantial stake building going on and I only hope this does not presage a bid. The company is very much in the right place at the right time and has rebounded in spectacular style from last year's fall back which I could never understand. The sp does seem very high but this is not a share to sell imho.
Over the last month this share has headed for the stratosphere. The proposed acquisition of PCA Predict is sound.....can't make my mind up on the price paid (probably because not enough research done yet), but with GB on a PE of about 50 (allowing for depressed EPS at half way) this share has little room for disappointment. Having already said they have increased profit by 27% and ahead of market census, I can;t help but feel they need to pull another rabbit out of the hat on June 6th.
I want to see this share continue to do well but am getting sorely tempted to put a trailing stop on it with a view to top slicing. It isn't quite back up to 5% of Mrs Pie's holdings, but heading that way rapidly at the minute......decisions, decisions.
I've just done a couple of charts on GBG for another board and thought I would post them here in case anyone is interested. These are just my opinion and interpretation.
I had GBG on my watch list early in 2016 but bought NCC instead. Both are in the Computer Services sub-sector of the Software and Computer Services sector.
Now it's daily chart looks interesting. Since Nov 2016 it has put in two ascending lows which are buy signals for me. It's been consolidating in the 270-295 range for the last month with reducing volatility.
It looks to me as if its next move will be up and that this will be signalled by a break above the consolidation range, an increase in volume and expanding Bollinger bands.
Here's the daily chart: http://schrts.co/ng8XtL
If it does breakout from the rectangle, it needs to stay above the top of the rectangle at around 294. The next resistance area would be around 318 which would close the October 2016 gap. After this 330 and 355 are the targets to beat. Current short term support areas are 270 and then 227.
NB This analysis is largely based on information from Bollinger Bands. Looking at a standard chart, the 50ema is rising towards a cross above the 200ema which is currently rising very gently. Both RSI and MACD-H are rising. So a move up may not happen imminently, but these signals are all positive and shown on this daily chart: http://schrts.co/Ubns2c
Seems to have picked itself up and dusted itself off a bit. The (slightly) ahead of expectation results calmed things a bit, as has some of the stock overhang from Richard Law stepping down and selling a big chunk of shares. I think we are now looking forward, rather than back over the last 6 months, and while the way forward isn't as "obvious" as previously - think government contract - at least there is a little optimism rather than the doom and gloom.
Glad I top sliced at £3 odd when was 5%+ of the relevant account, but also glad I continued to hold the majority. As this still accounts for 3.5% of Mrs Pie's ISA account, suspect we won't be adding too much though, purely on diversification grounds
A £1 wiped off the SP in a matter of weeks, back to levels seen at the start of the year is very unnerving for me.
New CEO aside, and slow activation of Gov't system shouldn't have the affect on the SP we are seeing today in my view. One would hope a further RNS could be issued to clarify/explain any basis for the drop?
Apparently tipped in Daily Telegraph Questor column as a buy...............Kiss of Death?
Personally I now rate it a hold until some of fog clears and things become little more "straightforward" (if that can ever be the case). Might have to wait for next trading update / results to see which way is forward though.
Despite my earlier view that the initial fall in the sp was simply overexcited expectations, the last two days makes one wonder if there is something very odd going on. Before the update, the sp had been falling and there were sales by directors. However, post the update there has been a selling frenzy with a large number of transactions both numerically and in value. The chart shows the sp falling off a cliff as if a fraud had been discovered or an imminent lawsuit,of which there is no indication and all the brokers had been recommending buy at various higher prices. Well, time will tell, but there does appear to have been a reaction way beyond the event that started the slide..
Would tend to agree with all those points, the only thing I would say is that GB has been pretty good at delivering what it said it would do, and flagging up changes to those forecasts, and that they have taken the opportunity to plan the exit and replacement of the CEO. In other words a Ronseal situation.
The disappointment I suppose is that MMs and perhaps one or two investors have not heeded advice that GDS (like ALL government entities) will not hit their target dates for implementation of projects. GB were aware of this and factored it in to their forecasts.
I trimmed holdings by about 1/3 some weeks ago purely because it was becoming a disproportionately large holding. If it falls much more (say 260ish) I may have to initiate an additional trading position.
Yes, in line with expectations but it depends on whose expectations. When you have a p/e of nearly 40 and a derisory yield, clearly the expectations are for a much greater rate of growth than the results indicate. Change of CEO is always a worry since they tend to leave at the peak. Still a very good company but will very likely trade at a more subdued level until above average growth re established. A lot riding on the new CEO
finnCap's note out earlier today: "As expected, this is a good set of results. Driven by international growth and expansion in the blue-chip client base, FY 2016 revenue is up 28% to £73.4m, although slightly below our £74m expectation. Adj. EBITDA rose 25% to £14.8m and adj. operating profit was up 24% to £13.4m, both in line with our forecasts. However, the group has a much reduced tax charge of just £0.2m in FY 2016 so FD adj. EPS..." scraped from research tree
The results, as expected, were very good but the dividend increase was poor. I know all the reasons for conserving cash for acquisitions etc. but the dividend cover is now unduly high and unless they assume profits will flatten or fall, should imho, been halved not increased. At the present rate for increase, the yield will still be meagre in 5 years time.
Read Edison's note on GB GROUP, out this morning, by visiting https://www.research-tree.com/company/GB0006870611
"GB Groups (GBG) CEO Richard Law has announced his intention to retire. He will remain at GBG for as long as required to ensure a smooth transition to a new CEO once appointed. He will be leaving the group in good shape; 27% of revenues are now from the strategically important international markets and the year-end trading update points to strong momentum, with FY16 EBITA 11% ahead of our forecasts..."
<b>GB Group plc 27% Potential Upside Indicated by finnCap</>
Posted by: Katherine Hargreaves 20th April 2016
GB Group plc with EPIC/TICKER LON:GBG had its stock rating noted as Reiterates with the recommendation being set at BUY today by analysts at finnCap. GB Group plc are listed in the Technology sector within AIM. finnCap have set their target price at 350 GBX on its stock. This would imply the analyst believes there is now a potential upside of 27% from the opening price of 275.5 GBX. Over the last 30 and 90 trading days the company share price has increased 20.4976 points and increased 28.25 points respectively.
GB Group plc LON:GBG has a 50 day moving average of 262.40 GBX and a 200 Day Moving Average share price is recorded at 254.13 GBX. The 52 week high for the stock is 291.84 GBX while the 52 week low is 186.5 GBX. There are currently 125,728,550 shares in issue with the average daily volume traded being 69,255. Market capitalisation for LON:GBG is £364,612,795 GBP.
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