There’s no doubt some individuals have made thousands, even millions, with their speculative bets on Bitcoin over the past few years. Maybe they were lucky — and some even prescient — but that was then and this is now.
My guess is the ultra-large gains to be had from Bitcoin are behind us. I reckon you needed to get in early to ride the meteoric rises we’ve seen, and it will likely be much harder to get a multi-bagging speculative outcome from Bitcoin at its current level around £8,200 per ‘coin’. After all, a Bitcoin was worth about £1 at the beginning of 2011.
To achieve an advance similar to the one over the period 2011 to 2019 from today’s level, Bitcoin would have to rise to just over £67m per coin, which strikes me as unlikely. But then I never expected the cryptocurrency to get as high as it has already! Nevertheless, rather than speculating on Bitcoin today, I’m much more likely to put my investment money in the shares of a small-cap company with fast-growing earnings such as Instem (LSE: INS).
Strong trading figures
The firm provides IT solutions to the global life sciences market, which makes it something of a ‘picks and shovels’ player in what can be a volatile sector. Rather than facing the ups and downs at the ‘coal face’ of the industry, Instem simply provides other companies with some of ‘tools’ they need, thus benefitting from activity in the sector.
Today’s half-year results report reveals some decent progress with the trading figures. Revenue rose 11% compared to the equivalent period the year before, net cash from operations moved 100% higher, and diluted earnings per share shot up 850%. The good performance led to a 62% increase in cash on the balance sheet to £6m and there are zero borrowings.
The company’s strategy involves moving clients from perpetual licences to Software as a Service (SaaS), where software is accessed online via a subscription, rather than being bought and installed on individual computers. It’s going well and new SaaS orders increased to £1.1m in the period, up from £0.5m last year. Meanwhile, the firm’s recurring revenue from annual support activities and SaaS came in at £7m, up from £6.5m last year.
A positive outlook
Chief executive Phil Reason said in the report the execution of the strategy has delivered an outcome ahead of the directors’ expectations and consequently “some short-term licence revenue is being replaced.” However, the “slight” short-term decline anticipated means an increase in longer-term recurring revenues ahead, which strikes me as a decent result.
The outlook is bullish with a “positive” market backdrop underpinning ongoing growth potential. Reason reckons the pharmaceutical industry is increasing investment in the types of software and services Instem delivers “to match the expanding drug pipeline and to satisfy increasing regulatory requirements.”
With the share price near 383p, the forward-looking earnings multiple for 2020 is just over 18. I’m tempted by the shares.