Afterthe great tech stock boom of 2000, Im finally feeling comfortable aboutcloud communications software and solutions companies (back then, the clouds were mainly in the bandwagon investors minds).
Today Im looking at full-year results fromIMImobile (LSE: IMO).
What we saw from these was a 19% boost foroperatingprofit to 4.9m, provided bya 24% rise in revenue to 76.1m. Operational cash generation of 11.9m with a cash conversion factor of 104% suggest the firm is producing the actual hard stuff in good measure and even after the 5.5m cost of acquiring Infracast, IMImobile was left with 14.7m in cash on the books.
Unfulfilled need
Chief executive Jay Patel said:There continues to be an overwhelming need for companies such as banks, mobile operators, retailers, utilities and major brands to invest in improving customer experience, predominantly through digital channels. Surely every one of us is painfully aware of that need and can think of at least one example of a big companyreacting to problems with a woefully incompetent approach to social media.
Mr Patel went on to say: We will continue to invest further in marketing and product development to establish a leading position in this growth market.
This year, adjusted earnings per share came in 6% ahead at 11p, for a P/E multiple of 19, and with modest rises forecast for the next couple of years, Im quite happy with that.
Fundamental ratios dont matter so much with companies at this stage of their life as long as they dont get crazy, and IMImobile is best evaluated on the subjective nature of its business. I see it as a risky but attractive proposition.
Picks and shovels
Turning to a company offering services to the technology industry, Im drawn to Gattaca (LSE: GATC), aspecialist engineering and technology recruitment business firms like these can do well whichever leading-edge tech companies they serve.
Im particularly intrigued by Gattacas earnings growth record, its further growth forecasts, and its impressive dividend prospects.
Despite a drop in 2016, EPS has risenby 32% between 2o12 and 2016, and forecasts for the next two years would see further growth of 27% by July 2018.
On top of that, the dividend has soared from 15.6p per share in 2012 to 23p last year, and though its expected to remain flat this year, wed still see a yield of 7.6% on todays 302.5p share price.
Shares look cheap
In P/E terms, were looking at a forward multiple of under 10, dropping to a bit over eight on 2018s EPS growth forecasts, so are there any negatives?
Well, a trading update in April suggested that profits for the full year wouldbe approximately 10%-15% below prior expectations. Weaker trading conditions in the post-Brexit era were partially blamed, as were a few one-off cost overruns and Im a little disturbed by the effects of that apparently not having been seen sooner.
But recruitment is very much a cyclical business, and a modest short-term underperformance is not unexpected. Im a little cautious, but I feel the sector has a strong long-term future, and I cant help seeing the current share price weakness as a buying opportunity.
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