AIM-listed software developer Sopheon (LSE: SPE) is making a name for itself today after the share price rose whopping 40% this morning.
Sopheon’s World
The international software and services provider may not have appeared on your radar before, but it makes its money helping its corporate customers boost their revenues and profits by bringing new products to market faster and improving their success rate. Investors have a soft spot for Sopheon after it published its full-year results for 2015, showing it has swung into profit, with management sounding increasingly confident about the future.
Sopheon posted 2015 revenues of $20.9m, a rise of 14.2% on the $18.3m it generated in 2014. It also made a pre-tax profit of $1.2m, turning around the previous year’s loss of $1.5m. EBITDA more than tripled from $1.2m to $4.1m. The outlook for 2016 also looks promising, with full-year revenue visibility of more than $12m, up 17.6% on the 2015 pipeline of $10.2m.
Uber-Mence
Chairman Barry Mence hailed his company’s “strong momentum and pipeline for further advancement in 2016“, which was helped by the release of new software platforms and investments in software services, including its new out-of-the-box Express solution. It has gained market recognition from industry voices such as Gartner, CIMdata and CGT magazine, all of which help drive the share price up to around 98p at time of writing.Â
Investors in smaller companies like Sopheon, which has a market cap of just £7.06m must brace themselves for swings like these. Its share price is still below its 52-week high of 107.75p, while volatility is demonstrated by a year-low of 45p last August. Revenues may have risen to $20.9m in 2015 but that followed a dip last year. In 2013, revenues stood at $20.84m, almost identical to 2015. Effectively, they are flat over three years.
I am always wary of buying stocks on the back of a spike like this one. In October last year, for example, the share price leapt from 59p to almost 90p in a couple of weeks, shortly after it released its Accolade Enterprise Innovation Management solution, but it then yielded those gains over the next few weeks.
Licence To Thrill
Where the share price goes in the longer run depends on the success of its future product releases and continuing ability to secure licence transactions from new and existing customers. Revenues and profits may be volatile as a result. That said, Sopheon has an attractive offering, helping companies improve planning, governance and performance measurement on high-risk/high-reward initiatives.
Consumer Goods Technology (CGT) readers have named Sopheon a top provider of New Product Development & Introduction (NPDI) solutions for the consumer goods industry for the sixth consecutive year, which suggests a strong reputation and staying power.
I am also pleased happy to see that the company offers its services across a range of sectors, including defence, oil, high-technology, core consumer goods and chemical, protecting it from a downturn in any one of them. I won’t be diving in on the back of today’s share price bounce, there is always the danger of getting caught out by subsequent profit-taking, but will be adding it to my watchlist.