Shares in Blue Prism (LSE: PRSM) have had a cracking time since the firm first floated on the Alternative Investment Market (AIM) back in March 2016 — not much more than a year later with the price at 680p, we’re already looking at a six-bagger.
That’s some stunning momentum there, but is it justified? And more importantly, does it have further to go?
Office automation
Blue Prism is hard to value right now, as it hasn’t recorded any profits yet and there aren’t any forecast for this year or next either. But this month’s trading update from the robotic process automation experts makes for exciting reading.
Interim results are due on 27 June, and the firm took the opportunity to tell us that “momentum has continued to build with 151 new software deals secured in the five months to 31 March 2017, of which 87 were new customers and 60 were upsells across 40 existing customers“.
The board now anticipates that first-half revenue will be “significantly ahead of existing market expectations“, and says that will help it invest further in sales and marketing.
What are the risks? I’ve invested in high-tech growth shares over years, sometimes successfully and sometimes not, and I reckon one of the biggest dangers is overestimating your understanding of what a company actually does. In the firm’s own words, its “enterprise-grade software enables the automation of manual, rules-based, administrative processes to create a more agile, cost effective and accurate back-office“.
And while that does have some meaning to me, I’m not sufficiently clued-up to really know how good its stuff is and what potential competition there is out there.
But bearing in mind that there is an element of a gamble here, Blue Prism does strike me as one that’s got everything right and could well be on the way to a very profitable future.
When the music starts to play
When I first came across Gear4music (LSE: G4M) and learned that it’s an online retailer of musical instruments and equipment, I had my doubts. Surely if you’re buying a new guitar, bagpipes, crumhorn, or whatever, you’ll want to do some strumming, puffing and parping in the shop to know if you like it, won’t you?
But then, I once thought something similar about online fashion retailing and assumed folks would want to try on their rags and feel the width before buying — but I was well wrong on that one, as the success of companies like ASOS has since shown.Â
I guess a lot of people buying music gear really do know what they want, and an online retailer has the potential to offer the widest range at the most competitive prices — and Gear4music’s performance seems to be more than supporting that notion. In its year-end trading update, the firm reported a 58% rise in total sales, with UK sales up 34%. But perhaps more exciting was a 124% rise in international sales, a market in which the company is really just getting started.
The share price has fallen back a little from March’s peak, but since coming to market in June 2015 we’re still looking at a gain of more than 250%. Forecasts suggest several years of strongly rising earnings, and I think we’re looking at another great (if, as always, risky) growth candidate here.
Full-year results are due on 9 May, and I’ll be paying close attention.