Why Shares In AVEVA Group Plc Spiked Today

Specialist software group AVEVA Group plc (LON:AVV) is flying today — here’s why!

Mark Rogers

As the Head of The Motley Fool’s UK Investing Team, Mark approaches the stock market with the same old-fashioned business instincts and values that he honed growing up around the family business. An investor for 20 years, Mark specialises in unearthing top-quality under-the-radar investments in the small-cap market. He currently serves as Director of Investing for Motley Fool UK services and Managing Director of Motley Fool UK.

Published 27 May, 2014 9:52 am BST

| More on: AVV

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Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.

What: Shares of AVEVA (LSE: AVV) — not to be confused with mega-insurer Aviva — soared by 12% this morning after beating market expectations in its annual results.

The company, which provides engineering data software for the likes of Shell and Siemens, boosted revenues by 8% to £237m for the year, generating £52m of cash in the process.

So what: AVEVA may not be a household name, but among investors, its reputation is growing — the company delivered an operating margin of 29% in these results, earning a return on capital of more than 18%.

Apart from a one-year blip during the financial crisis, AVEVA has now grown its sales and profitability every year since 1997, a remarkable feat.

This was just “another year at the office” for AVEVA it seems, which has made a habit out of quietly producing impressive returns for its shareholders.

Now what: That doesn’t mean AVEVA isn’t already highly rated by investors of course. Despite losing nearly 30% of their market value since last summer, the shares have rarely looked inexpensive, and even before today traded on a forward P/E of 22.