Digital economy

Ascential’s shares opened 2.3% lower at 449p this mornings after the £1.8bn mid-cap released its half-year results. Nevertheless, they’re up a healthy 33% over the last 12 months. Management said first-half trading was in line with its expectations and that it “remains confident in our overall 2018 performance and our prospects for continued success.”

Closing net debt at 30 June was £285m but the group has since received a net £284m cash from the disposal of its exhibitions business to ITE. This provides Ascential with headroom to develop its other businesses via organic growth and acquisitions. These businesses are focused on information and analytics, and provide customers with the means “to win in the digital economy by excelling at product design, marketing and sales.”

When I looked at Ascential last summer, the share price was 374p and the forward price-to-earnings (P/E) ratio was 21.4. At today’s share price and on City earnings forecasts of 17p a share, the forward P/E is 26.4. This looks too rich to me for a company expected to grow earnings by 15% from 2018 to 2019 and with it also offering a fairly meagre dividend yield of 1.4%, I rate the stock a ‘sell’ at the current level.

Multiple collaborations

Versarien is currently lossmaking but is a hugely popular stock with private investors. Indeed, the three biggest holdings in the company are represented by the pooled investments of retail clients of Hargreaves Lansdown, Interactive Investor and Halifax Share Dealing.

The group has made five acquisitions since floating on AIM at 12.25p a share in 2013, three of which were revenue-generating at the time. The total acquisition cost for the three was £4.2m and in the year before Versarien bought them their revenues added up to £11.7m. Versarien reported total group revenue of £9m in its latest annual results, released last week. Therefore, I find it hard to value these businesses at much more than the £4.2m Versarien paid for them.

The company’s shares are trading a little down from their recent high of 141p, valuing the group at £210m. As such, I’d say the other two businesses Versarien acquired are being valued at over £200m. It bought 85% of each company, paying £440,000 in one case and £170,000 in the other. These businesses are focused on advanced material graphene and Versarien has announced multiple collaborations and trials with partners in a variety of sectors. However, the agreements are short on detail at this stage, particularly financial detail.

It’s reckoned the industry could be worth $1bn globally by 2025 and my Foolish colleague Rupert Hargreaves believes now could be a good time to buy into Versarien’s growth story. I’ve previously been bullish on the company myself, when the shares could be bought at 10 times current revenue (my upper limit for this kind of stock). However, with the valuation now up to well over 20 times revenue, I see the risk/reward trade-off as having turned unattractive and I’m inclined to rate the stock a ‘sell’.

The post Is the Versarien share price still cheap or could it cost you dearly? appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The media colossus was last dealing 6% higher in start-of-week trade at 400p per share, taking total gains over the past year to 34%. And I fully expect Ascential to continue its northwards trek as its ambitious sales strategy grinds through the gears.

The FTSE 250 business declared “another year of good organic growth” in 2017, “underpinned by strong customer retention and product innovation” in 2017. Revenues from continuing operations climbed 25% year-on-year in 2017, to £375.8m. Organic turnover at constant currencies increased 6.4%.

As a result, pre-tax profit vaulted to £32.7m in 2017 from £3.5m a year earlier.

Digital dynamo

It comes as little surprise that the London firm’s share price continues to make such impressive headway. Today the company commented that “the year ahead presents great opportunity for Ascential. Economic markets, particularly for our most important brands, remain strong, particularly with our focus on supporting customer success in the digital economy.”

Indeed, the decision to prioritise high growth brands in the digital realm remains an underutilised space that provides plenty of revenues opportunities in the years ahead. As Ascential said: “Many of our clients currently achieve less than 20% of their total sales through digital channels. They themselves recognise the need to move faster to drive this critical transition and, with our developments in the last 18 months, we are now very well positioned to assist them.”

City analysts are expecting the media star to carve out a fractional earnings improvement in 2018 before profits growth ignites further out — a 15% rise is forecast for 2019. True, Ascential may not come cheap, it carrying a forward P/E ratio of 21.6 times. But I believe the prospect of strong and sustained sales expansion long into the future makes the company worthy of such a premium.

Golden giant

I reckon Randgold Resources (LSE: RRS) is another share worth buying and hanging onto for the years ahead.

Exposure to gold is a brilliant bet to have in one’s share portfolio as last month’s mild share market sell-off revealed. Whilst riskier assets may be back on the buying agenda, a bear market may just be around the corner as central banks tighten the flow of ‘cheap money’ and fears of an overdue market correction persist, a situation that could push bullion prices skywards again.

City analysts believe Randgold Resources is a great growth bet in the medium term at least, helped by the FTSE 100 company’s surging production levels (these rose 5% in 2017 to 1.32m ounces). Indeed, current forecasts suggest earnings expansion of 22% and 4% in 2018 and 2019 respectively.

The gold digger carries an additional perk in that it is one of the Footsie’s more lucrative dividend payers too. The annual payout doubled last year to 200 US cents per share, and further growth — to 326 cents and 397 cents per share — is forecast for this year and next. Consequently yields stand at 3.8% for 2018 and 4.7% for 2019.

I reckon Randgold Resources is a brilliant buy in today’s climate even in spite of its high forward P/E ratio of 23.7 times.

The post 2 growth stocks I’d buy and hold for the next 10 years appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

If you’re an investor in a business — as opposed to a trader betting on short-term movements of a share price — the answer is generally to be found by applying Warren Buffett’s adage: “Price is what you pay, value is what you get.”

A share price may be at a new high but the performance and prospects of the business may have improved to the extent that the stock still offers excellent value for investors. With this in mind, I’m looking today at two high-flying FTSE 250 firms.

Global, diversified business

Shares of Hays (LSE: HAS) extended their one-year gain to 33% after the company released its annual results this morning. In what it described as a “milestone year,” the international recruitment group said: “The transformation of Hays into a truly global, diversified business is evident in these results.”

The company reported “strong, broad-based” net fee growth in its Continental Europe & Rest of World segment, with record performance in Germany, which is now its largest business in the world. Asia Pacific delivered “good overall net fee growth,” with Australia the standout performer.

Net fees were lower in the UK & Ireland. The UK private sector “saw a marked step-down after the EU Referendum” but “activity levels quickly stabilised and we exited the year with modest private sector growth.” For its smaller public sector business, conditions “remained challenging.”

Oozing cash and confidence

Hays’s geographical diversification meant that, despite the subdued UK performance, group net fees and operating profit increased 18% and 17%, respectively, driven by international growth and favourable exchange rates. There was a strong 103% conversion of operating profit into operating cash flow and the company’s balance sheet boasted net cash of £112m at the year-end.

A 14% increase in earnings per share (EPS) to 9.66p, supported an 11% increase in the ordinary dividend to 3.22p and a first special dividend of 4.25p. At a current share price of 175p, the trailing price-to-earnings (P/E) ratio is 18.1 and the overall dividend yield is 4.3%.

With the company saying that “conditions remain good in the vast majority of our markets and we see many clear opportunities to grow,” I rate the shares a ‘buy’ at today’s new high.

Still very buyable

Also trading at a new high today is fellow mid-cap Ascential (LSE: ASCL). The international business-to-business media group, which specialises in exhibitions, festivals and information services, posted strong first-half results last month.

Revenue and operating profit from continuing operations increased 26% and 28%, respectively. As with Hays, this was driven by international growth and favourable exchange rates. Free cash flow and cash conversion increased, net debt was lower and the board hiked the interim dividend by 20%.

At a new all-time high share price of 374p, Ascential’s P/E is 21.4, based on current-year earnings forecasts, and the prospective dividend yield is 1.5%. The valuation is higher than that of Hays but the strength of its half-year performance and the positive momentum in the business, lead me to conclude that the stock remains very buyable today.

The post 2 FTSE 250 stocks at 52-week highs that may still be worth buying appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Under the radar?

One possible example is FTSE 250 event and information services company Ascential (LSE: ASCL). Although it has a market cap of almost £1.4bn, this company only floated in 2016 and remains below the radar for many investors.

The group focuses on the business-to-business sector, which I find attractive. Trade marketing events and subscription-based information services are areas of the media industry that have remained profitable, while many consumer-focused services have struggled.

Ascential’s revenue from continuing operations rose by 26% to £222m during the first half of 2017. The group’s operating profit from continuing operations was 28% higher, at £48.1m. Although revenue growth fell to 7.2% when currency gains were excluded, the group’s trailing operating margin rose to 12.3%, up from 10.7% in 2016.

A second attraction is that this business appears to generate plenty of surplus cash. The group generated adjusted free cash flow of £74.5m during the first half of the year, up from £58.7m for the same period last year. This has helped management to reduce net debt from £223.7m to £211.4m so far this year.

This free cash flow also provides solid support for the dividend. And although the forecast yield is currently only 1.8%, I believe the combination of rising earnings and falling debt should drive stronger dividend growth in future years.

Although the stock isn’t cheap on 19 times forecast earnings, I think Ascential has the potential to be a profitable long-term hold.

A proven performer

You may not have heard of FTSE 250 catering firm SSP Group (LSE: SSPG). But you’ve probably been a customer of the firm at one of its airport, railway station or motorway service food outlets.

SSP trades under a wide range of well-known brands, including Upper Crust and Ritazza, as well as some franchised operations such as Burger King and Starbucks. The group also operates one-off ‘local hero’ outlets such as James Martin Kitchen at Stansted Airport.

In total, the group operates more than 2,200 outlets in over 30 countries. The business is headed by chief executive Kate Swann, whose previous role was as CEO at WH Smith. Ms Swann turned Smith’s travel business into a fast-growing and very profitable operation. The indications so far are that she’s doing the same at her new company.

SSP reported sales of £1,073m for the first half of this year, up 8.1% on the same period last year excluding currency gains. The group’s underlying operating profit rose by 24.7% at constant exchange rates to £42.8m, adding 0.3% to operating margins.

Adjusted earnings per share rose by 26% last year and are expected to increase by about 19% this year. I’d expect these gains to be accompanied by further improvements in the group’s profit margins.

Although the shares’ forecast P/E of 27 is expensive, I think there’s every chance SSP will grow into this valuation over the next couple of years. Earnings forecasts have been regularly upgraded over the last year. I believe the stock remains worth buying.

The post Ascential plc could be the best growth stock you’ve never heard of appeared first on The Twelfth Magpie.

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Roland Head has no position in any shares mentioned. The Motley Fool UK owns shares of SSP Group. The Motley Fool UK has recommended WH Smith. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Safe bet?

With growth like that we would expect the stock to be rather expensive, especially given the current heady technology stock valuations. In that respect, a P/E of 22.2 times earnings looks almost cheap. Paysafe’s big breakthrough came in 2016, when pre-tax profits soared from $11.81m to $167.99m, while earnings per share (EPS) rose a rarely seen 1,350%.

In that context, forecast EPS growth of ‘just’ 70% in 2017 looks tame, and 11% in 2018 positively under-achieving. Please do not buy this stock expecting it to turn into another 10, sorry, 11-bagger. Paysafe is now anticipating low double-digit organic growth revenue for full-year 2017, with management reporting that the company is performing as expected so far.

On the money

The Isle of Man-based firm, formerly known as Optimal Payments, also continues to de-lever even after returning £22.4m of capital to shareholders in the form of a share buyback during the first three months of the year. This cash generative business has worked hard to pay down its debts.

Investors who bear the scars of investing in troubled mobile payments player Monitise, destroyed by Apple Pay, will not need reminding that it is a precarious area. Paysafe is diversifying from its niche of servicing the gambling industry, and with a market cap of £2.48bn this is no vulnerable start-up. The future still looks promising, but it isn’t for those who like to play safe.

Steep ascent

After all that excitement, growth at Ascential Group (LSE: ASCL) looks rather humdrum by comparison. It is up a mere 71% since first listing on the London Stock Exchange around 18 months ago, and 34% over 12 months. This global business-to-business media company now has a market cap of £1.37bn, and declared its maiden interim dividend of 1.5p per share last August.

Formerly the publisher known as Emap, Ascential is looking to accelerate its growth spurt by selling off 13 of its ‘heritage’ brands, to focus on those with higher growth potential. They have been shifted into a separate operating entity with its own business strategy while buyers are sought out.

Old trade

These are all familiar names from my days in the business press, including reputable names such as Health Service Journal, Drapers, Nursing Times, Construction News, New Civil Engineer and Architects’ Journal, so I am sad to see them hived off as low growth businesses. On the other hand, I applaud Ascential’s ruthlessness in prioritising faster growing sectors.

Ascential posted EPS growth of a whopping 285% in 2016 but that is forecast to fall to 11% this year, then climb slightly to 13% in 2018. Profit growth is also likely to slow, rising only slightly from £98.29m this year to £102.69m next. One consolation is that you will get a 2% yield by then, if forecasts are correct. Its current valuation of 84 times earnings look pricey, but that is forecast to drop to just 20 times. Ascential still tempts, but again, I fear you may have missed the real action.

The post Are these two FTSE 250 growth stocks getting too pricey? appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

High-growth potential

Reporting on Friday was international business-to-business media company, Ascential (LSE: ASCL). Its update was exceptionally brief, and stated that the company is performing in line with expectations ahead of the end of the first half of its financial year. While short, the update helped to push the company’s share price 0.5% higher on the day, which takes its capital growth to 65% since the start of the year.

Part of the reason for the company’s strong share price returns in 2017 has been its improving outlook. Ascential is expected to record a rise in its bottom line of 11% in the current year, followed by further growth of 13% next year. This is almost twice the forecast growth rate of the wider index, and could lead to even further capital gains. That’s especially the case since the stock trades on a price-to-earnings growth (PEG) ratio of only 1.4, which suggests it offers a relatively wide margin of safety.

In addition, the company is forecast to increase its dividend payments by 50% over the next two financial years. This may put it on a yield of only 2%, but signals that it could become a more popular income share in future. With shareholder payouts due to be covered 2.8 times by profit even after its forecast rise in dividends, it could become a strong income option.

Uncertain outlook

The future for cinema chain Everyman (LSE: EMAN) is highly uncertain at the present time. The UK’s economic outlook is now less stable than prior to the general election, which could mean the company’s sales suffer in the short run. A weaker pound has helped to push inflation higher, which means it now beats wage growth. This will almost inevitably put pressure on consumer spending, with the result likely to be less spending on discretionary items such as trips to the cinema.

Despite this, Everyman could be worth buying right now. Its uncertain outlook appears to have been factored-into its valuation, with the company’s shares trading on a price-to-earnings growth (PEG) ratio of just 0.5 at the present time. This suggests that it offers a wide margin of safety, which could mean downside is limited and upside potential is relatively high.

Although Everyman may prove to be a relatively volatile stock in the short run, for long-term investors it seems to offer high growth potential at a reasonable price. As such, it could be worth buying.

The post 2 stunning value stocks I’d buy right now appeared first on The Twelfth Magpie.

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• How much is needed in an ISA to unlock £1,220 of passive income a year?
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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Robust performance

Wednesday’s update from housebuilder Redrow (LSE: RDW) showed that talk of challenges in the housing market have thus far been overhyped. The industry continues to deliver robust performance even as uncertainty surrounding Brexit builds. While this does not mean that house price falls will be avoided, the scale of challenges facing housebuilders may have been exaggerated.

Certainly, Redrow’s update indicates that this is the case. It is on target to record financial performance for the full year which is in line with previous guidance. It is due to deliver an increase in earnings of 14% this year, followed by further growth of 5% next year. Despite this encouraging growth outlook, the company’s shares trade on a price-to-earnings (P/E) ratio of 7.8. That’s after a share price rise of 15% since the start of the year, which highlights just how cheap the company’s shares were.

With inflation moving higher and Brexit talks set to start shortly, some investors may consider there are short-term risks for housebuilders such as Redrow. Thus far, they have yet to make an appearance. Rather, with such a low valuation, the risk/reward opportunity on offer appears to be highly enticing.

Rapid growth

Since the start of the year, business-to-business media company Ascential (LSE: ASCL) has delivered a share price gain of around 16%. While this may indicate to some investors that a pullback may be ahead, the company’s valuation suggests otherwise. It is forecast to record a rise in earnings of 16% this year, followed by further growth of 13% next year. This puts it on a price-to-earnings growth (PEG) ratio of only 1.2. As such, there seems to be a sufficiently wide margin of safety on offer to merit purchase.

As well as capital growth potential, Ascential also has income appeal in the long run. Dividends per share are forecast to rise by 55% between 2016 and 2018, which puts the company’s shares on a forward dividend yield of 2.3%. And since dividends are due to be covered 2.9 times by profit in 2018, there seems to be scope for them to rise at a faster rate than earnings over the medium term.

While the outlook for the global economy is somewhat uncertain. Ascential’s low valuation indicates that investors may have already priced-in a challenging outlook. As a cyclical company, its financial performance may be hurt to a greater extent than most stocks if global GDP growth is downgraded. While this cannot be ruled out in the short run, for long-term investors the company appears to offer an attractive risk/reward ratio.

The post 2 FTSE 250 momentum stocks you can’t afford to ignore appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Redrow. The Motley Fool UK has recommended Redrow. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

A cracking IPO?

Ascential (LSE: ASCL) shares have soared by 48% since flotation just a year ago. It’s a business-to-business media company which handles events and information services — it’s responsible for the Cannes Lions International Festival of Creativity, for example.

Results for 2016 should be with us on 27 February, and there’s a serious profit expected. At the halfway stage, we saw a 28% rise in adjusted operating profit, and a strong EBITDA margin of 33%. The cash that generated allowed the company to get its IPO-time leverage of 2.5 times down to 1.9 times, which is impressive in less than six months.

The mooted P/E multiple of 20 would imply a PEG of 0.1, although such valuations are really not so meaningful for a new growth prospect that is only just turning profitable.

But forecasts for the next two years would drop the P/E to 15 by 2018, and dividends are expected to climb sharply and provide a yield of 2.3% that year. With Ascential showing strong cash-cow potential, I see good times ahead.

ZP… who?

I don’t really understand why companies with well-known brands change their names, but that’s what Zoopla Property has done by switching to ZPG (LSE: ZPG) this month. In a way it makes sense, as the company doesn’t just run its Zoopla business, but also uSwitch which the company bought in April 2015, plus the PrimeLocation and Property Software Group brands.

Results to September 2016 included an 84% rise in revenue, leading to a 51% boost to EPS. Debt was up, but the company had a successful equity placing earlier this month which raised a gross £76m.

We’re looking at a potentially impressive growth company here that is still in its early stages, and that does show in the current share valuation — at a price of 382p, we see a forward P/E of 27 this year, though earnings growth forecasts would drop that to 23 next year.

But unlike some online offerings in their early days, ZPG is strongly cash generative, and it’s already handing out strongly progressive dividends — the yield should only be around 1.5% this year, but it’s rising way faster than inflation.

Another rename

Speaking of renamed companies, office space provider Regus has changed its name to IWG (LSE: IWG), with the new entity registered as a holding company in Jersey. Regus/IWG shares have fallen from a November 2015 peak of nearly 350p to 262p today, so does that represent an attractive buying opportunity? I think it does.

The company has been steadily growing its profits for years, and analysts have two more strong forecasts out for this year and next — EPS rise of 21% for 2017, followed by another 16% in 2018. That provides PEG ratios for the two years of 0.7 and 0.8 (where 0.7 and under is usually considered very attractive), which I think shows a tempting growth valuation for what is actually quite a mature company. IWG is paying dividends, too — yielding only around 2.3%, but that’s a nice extra for a company I’d buy specifically for growth.

Full-year results are due on 28 February. The nine months to September 2016 saw revenue rise by 8.1%, with underlying cash generation increasing 52% year-on-year, and I think that presages another good year.

The post 3 overlooked FTSE 250 growth stocks to buy now? appeared first on The Twelfth Magpie.

More reading

• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Shrewd acquisitions

In its most recent trading update for the six months to the end of December 2016, the Northwich-based pharmaceuticals business reported significant growth in the first half of its 2017 financial year, helped by several acquisitions. Group revenue for the period increased by 34% on a constant currency basis, and by an even more impressive 56% at actual exchange rates.

But it wasn’t all down to shrewd acquisitions. Core revenue growth, excluding the benefit of acquisitions, came in at 7% on a constant currency basis, and 22% at actual currency rates. The group’s North American business delivered the best performance, with total revenues, including acquisitions, up 112% on a constant currency basis, and by a mammoth 152% at actual exchange rates. The European business lagged behind, with revenues up by 12% on a constant currency basis, equating to 29% at actual exchange rates.

US approval

Dechra’s acquisitions are certainly pulling their weight, not only in their significant contributions to the company’s revenues, but also in increasing the group’s pipeline of new drugs. In September the company gained regulatory approval in the US for Amoxi-Clav, a ‘companion animal’ generic antibiotic. This was the first major product to come out of the pipeline of the acquired Putney business.

The City continues to be optimistic about Dechra’s prospects, with analysts talking about a 29% rise in earnings for the current year to June, followed by a further 23% improvement the following year. But after a 54% share price gain over the past 12 months, the shares look fully valued, and I would wait to buy on weakness for a better entry point.

Shares rocket

Another FTSE 250 firm that’s been doing rather well is market newcomer Ascential (LSE: ASCL). Shares in the international business-to-business media group have rocketed since their London launch exactly a year ago, gaining an incredible 53%. The group announced recently that it had begun preparations to sell 13 of its heritage business-to-business publishing and events brands, as it looks to focus on its largest brands and those with the highest growth potential.

Full-year results for 2016 aren’t due to be released until later this month, but consensus estimates suggest that the media group will report a massive leap in pre-tax profits to £74.5m, from £8.4m in 2015, with higher revenues of £344m compared to £319m the year before. Despite the group’s impressive performance to date, at 17 times forward earnings I feel the shares are no longer undervalued.

The post Why I’m avoiding these exciting growth shares right now appeared first on The Twelfth Magpie.

More reading

• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?

Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

It’s little wonder that shares of Blue Prism (LSE: PRSM) are up over 165% since debuting in March as the company has taken to heart the Silicon Valley marketing ethos of promising to upend entire industries with its sexy new “pioneering robotic process automation software.”

What does this mean in plain English? Blue Prism designs software that frees white-collar works from some of the drudgery of modern office life by automating repetitive tasks such as data input and number crunching.

Over the top marketing slogans and annoyingly obtuse website product descriptions aside, it does have a large potential market to exploit. Major multinationals are always looking to cut costs and automation software could be the next wave of outsourcing, although the destination this time is the cloud rather than Calcutta.

Major firms have been brought on board to test Blue Prism’s software and year-on-year contracted revenue (actual billings and future contract sales) in H1 jumped from £6.6m to £14.8m. The problem is that the business is still not profitable and the firm lost £2.6m in the same period. With £11.1m in cash on hand, this means the company has breathing room for the time being but will need to see cashflow from recurring revenue pick up or slow investment sooner rather than later.

Blue Prism has high potential but larger rivals are also attempting to exploit this growing market and with analysts expecting operations to bleed red ink for at least the next two years, I won’t be jumping in feet first just yet.

Professionals’ secret weapon?

You may not have heard of the Cannes Lions International Festival of Creativity but evidently plenty of advertising professionals care about this awards show for their sector as the event brought in £52.9m in revenue for parent company Ascential (LSE: ASCL) in H1. Steady growth from business-to-business events like this has helped boost Ascential’s share price by 44% since going public in February.

Unsurprisingly for anyone who has had their company pay hundreds or thousands of pounds for tickets to events such as the one in Cannes, this is a highly profitable business. In H1 Ascential’s events segment recorded 44.9% EBITDA margins and posted year-on-year revenue growth of 27.4% due to organic growth and new events.

The company is also putting to good use the vast trove of data and creative intelligence out there by selling industry data and forecasting services through products like WGSN  for fashion, retail and trend professionals. This segment now accounts for 41% of overall revenue and, while less profitable than the events business, still added £20.1m of EBITDA in the first half of 2016.

With 19.6% operating margins and double-digit top-line growth it’s little wonder that shares have increased by more than a third in value since the IPO. However, one wrinkle investors should pay attention to is the pile of debt that Ascential’s private equity owners took on before selling shares to the public.

While IPO proceeds and retained earnings had whittled net debt down to £193m by the end of June, this amount of leverage will likely impinge on management’s ability to release significant cash to shareholders through dividends or share buybacks. That said, the company is expected to post its maiden profits this year and as net debt falls, organic growth has the potential to be boosted by bolt-on acquisitions.

The post Don’t look now but these 2016 IPOs are already up by more than 40% appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.