Today I am explaining why Quindell (LSE: QPP) could be a terrific bet for those seeking stunning share price growth.
Revenues set to track higher
Unquestionably, software builder Quindell’s position as one of the world’s foremost telematics providers has allowed it to enjoy explosive top-line growth in recent times.
The business announced last month that revenues surged 119% during January-June, to £357.3m, a result which drove pre-tax profit 292% higher to £153.7m. More specifically, turnover at its Professional Services Division rocketed 108% higher to £293.3m during the period, mainly on the back of huge organic contract wins during the past year.
The firm’s role as a top supplier to some of the world’s largest auto manufacturers and insurers has enabled it to enjoy this explosive sales growth. And with telematics technology continuing to take off, I expect the contract awards to continue heading skywards.
A bona fide bargain
On the back of this, Quindell should be a strong contender or a positive price re-rating, in my opinion, particularly if current City projections are anything to go by.
The number crunchers expect the business to punch stunning growth to the tune of 46% and 47% in 2014 and 2015 respectively. This leaves Quindell changing hands on a P/E ratio of just 3 for this year and 2 for next, comfortably within the bargain threshold of 10 or below.
Cash is king
But as broker Canaccord Genuity — whose share price target of 362p represents a 120% premium to current levels — points out, Quindell will have to make good on its current cash forecasts in order for the market to take these earnings figures.
So investors would have been buoyed by the board reaffirming its second-half operating cash guidance of between £30m and £40m, as well as its target of £100m for the whole of 2015. And as Canaccord Genuity points out, “positive operating cash flow in July is the first tangible evidence that the third quarter target should be met,” adding that “it is likely that operating cash flow in August and September will also be positive.”
Should these predictions prove correct, and October’s interims illustrate further momentum on the cash front, I believe that Quindell’s share price could be on course to shoot higher.