Taking today’s action into account, the shares have climbed a smidgen under 1,000% since July 2015, underlining the potential for a single business to completely transform a portfolio’s performance and, in doing so, the wealth of those lucky enough to be invested in it.

Just the start?

This morning’s interim results were predictably excellent. Post-tax profit hit $166.3m for the six months to the end of June — up 17% from the $142.7m achieved over the same period in 2017. Income rose by the same percentage from $177.5m to $205.2m with 65% of this from realised gains. Cash generation soared 61% to $299m with the company’s total assets also climbing 37% in value to $1.64bn by the end of the period.  

While this kind of growth can’t continue indefinitely, I wouldn’t be surprised if Burford — thanks to its status as global leader in what can still be regarded as a niche market — replicated numbers like this for a while yet. Indeed, Chairman Sir Peter Middleton reflected that the company “continues to set the pace for a growing industry.” And CEO Christopher Bogart added that the commitment of more than half a billion dollars to new investments over the traditionally slow interim period fills management with “excitement” on Burford’s potential. While most definitely not a stock for income seekers, the 20% increase in the interim dividend to 3.67¢ only serves to emphasise this confidence.  

Clearly, these superb figures coupled with the great outlook means that buying a slice of Burford’s success is no longer cheap. On a forecast price-to-earnings (P/E) ratio of 26, the stock is now looking pretty dear compared to its industry peer group. With sky-high operating margins and increasing returns on the capital it invests, however, one might argue that that the quality on offer deserves such a valuation. 

Still rising

Burford isn’t the only stock that’s defying gravity. AIM-listed premier technology solutions provider Accesso Technology (LSE: ACSO) is another example of just how quickly a company’s value can shoot upwards. Three years ago, its share price was a little above the 500p mark. Today it stands at 2770p.

Like Burford, further gains seem likely. May’s pre-AGM trading update highlighted a “strong start” to 2018 thanks in part to an extension to an existing deal with global theme park operator Ceder Fair Entertainment.

Positively, Accesso — led by relatively new CEO Paul Noland — is not resting on its laurels. In addition to rubber-stamping a new contract with Detroit-based Henry Ford Health System (marking the company’s first foray into the healthcare industry), it’s also attempting to push its Ingresso ticketing distribution system in the US. Elsewhere, the company’s ShoWare solution continues to be popular, with the mid-cap overseeing ticketing for the opening ceremony of the Special Olympics USA Games earlier this month.

Again, all this comes at a price. Changing hands for a seriously steep 46 times projected earnings, Accesso’s stock is even more expensive than that of Burford. While I don’t doubt that growth will continue and its valuation will eventually surpass the £1bn mark, prospective investors may wish to consider waiting for a general market sell-off before joining the queue for its stock.

The post This top growth stock has now 10-bagged in just three years appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers 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.

Comfortably ahead

Despite almost 15-bagging since April 2016, last week’s trading update (after the close of its financial year) did nothing to shake my belief that the company’s best days still lie ahead.

During the second half of the year, Blue Prism “continued to generate strong sales momentum” by adding 266 new customers (sourced via the company’s global partner channel) to its books. These include FTSE 100 utility giants National Grid and United Utilities. Motor company Honda, entertainment giant Sony Pictures and the Federal National Mortgage Association (otherwise known as Fannie Mae) also feature on the list. In addition to this, the company secured 181 upsells with existing customers and a further 13 renewals.  

All told, this brings the total number of software deals over the financial year to a staggering 609. Perhaps unsurprisingly, Blue Prism’s full-year revenue is now expected to come in “comfortably ahead of current consensus expectations,” even if the business remains lossmaking at this stage. 

Since its launch back in April, its Technology Alliance Partner (TAP) ecosystem and platform — designed to allow partners to “help enterprises build out best-of-breed solutions incorporating cutting-edge cloud and artificial intelligence (AI) capabilities” — has proved extremely popular. Giants like Google, IBM and Microsoft have all signed up.

With some of the world’s biggest companies now engaging with the AIM-listed business, it’s no wonder that the £900m cap was recently awarded the title of innovation of the year at the UK Tech Awards and named as one of MIT Tech Review’s 50 Smartest Companies for 2017.

Let your winners run

Given such massive gains, it’s understandable if some early investors are becoming rather nervous that the shares will lose momentum and profits could be lost if not taken.

Of course, this could happen. Nothing can ever be taken for granted when it comes to investing and no share rises in a straight line. Nevertheless — conscious of the tendency for investors to snatch profits — I’m prepared to take any volatility in my stride.

The robotic process automation market has been growing at a rapid pace over the last few years. It will surely only continue over the next decade as more companies wake up to the savings they could make by employing digital robots to perform mundane tasks and re-directing staff to more important duties that help firms to remain competitive. Indeed, according to a report from Global Markets Insights, the market is expected to hit £5bn in 2024. I think even this estimate could prove conservative. 

Having doubled the number of staff and opened new offices in Tokyo, Bangalore and Sydney over the last year, it’s not hard to see why Blue Prism’s CEO Alastair Bathgate is so bullish when he stated that the company was looking forward to “another exciting year of growth“. Once the full potential of the RPA market is fully digested and success stories are shared, Blue Prism could easily emerge as a multi-billion pound company, in my view.

In short, I’m sticking with Blue Prism until 2027. Unless, of course, the company is acquired by deep-pocketed suitor at a satisfying premium.

The post One growth stock I’m holding for the next decade appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers owns shares in Blue Prism. 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.

Today’s update is unlikely to ruffle many feathers. Group revenue per available room (RevPAR) – a performance metric widely used in the hotel industry – rose 2.3% over the reporting period. Europe and Greater China remained the best-performing markets for the company in 2017 with RevPAR growth of 7.1% and 7.8%, respectively, in the third quarter. The former was helped by double-digit increases in Belgium and Turkey as trading in both countries recovered strongly from terrorist attacks. Elsewhere, performance in the Americas was mixed with the impact of Hurricanes Harvey and Irma in the US and the recent earthquake in Mexico taking the shine off buoyant trading in Canada and Latin America.

Looking to the future, CEO Keith Barr reflected that the £7.8bn cap had made “an excellent start” on its plans to accelerate the growth of its brands. In addition to opening 11,000 rooms over the period, the company also launched avid hotels (designed to target a “$20bn underserved segment in the US“) and secured signings in Shanghai, Sanya Bay and Auckland. It also has 235,000 rooms in its pipeline, with 45% of these currently under construction.  

So, what’s the problem, you ask? Simply that, at 23 times forecast earnings, a lot of growth already appears priced in to the shares, which may explain the market’s rather mooted reaction to this morning’s update. Considering the hugely competitive market in which it operates, not to mention the popularity of alternative sources of accommodation such as Airbnb, I’m left wondering if better opportunities might exist elsewhere.

Growth… at a better price

Those concerned by InterContinental’s valuation may wish to consider Premier Inn owner Whitbread (LSE: WTB) instead. While still to test the heights it achieved back in 2015, the Dunstable-based company’s stock trades at a considerable discount to its peer at just under 16 times forecast earnings. 

Like InterContinental, Whitbread is keen to continue pushing its brands overseas. Only this week, the company announced that it will acquire the remaining 49% of its South China Costa joint venture with Yueda for £35m. This will allow the former full ownership of 252 stores and access to a “highly attractive” and “fast-growing” market, according to CEO Alison Brittain.

By not relying solely on its hotel business, it may be suggested that Whitbread is also a safer play than Intercontinental. Other reasons for favouring the hospitality firm’s share include a slightly higher (2.5%) forecast yield and significantly less debt on its balance sheet. True, the possibility of a slowdown in discretionary spending by consumers as inflation begins to bite isn’t ideal, but the notion that we’re all about to dramatically reduce our caffeine intake feels over-the-top.  

While it might be best to wait for next Tuesday’s interim numbers for signs that the company has managed to reverse the dip in sales seen earlier in the year, I think Whitbread offers far better value at the current time.

The post Time to check out of this FTSE 100 multibagger? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

Despite this wonderful performance — and the massive valuations now attached to both stocks — I think there could be further upside ahead. 

Still in tune

While fairly light on detail, today’s AGM trading update from Gear4music saw CEO and founder Andrew Wass confirm that the business was trading in line with expectations with revenue growth in both in the UK and its international markets continuing to be “strong relative to a very strong H1 FY17“. Recently opened European distribution centres in Sweden and Germany are “materially improving” Gear4music’s presence in Northern Europe and further sales momentum is predicted in H2.

As previously announced, the company expects the current financial year to follow a “more typical seasonal trading pattern” with sales and profits weighted towards H2. First-half numbers — due in October — will also take into account costs relating to the aforementioned distribution hubs and the firm’s new premises in York. 

As updates go, today’s statement was hardly doom-laden. In keeping with investors’ tendency to wildly overreact when anything less than perfect is announced by a market darling however, shares fell over 12% in early trading.

Today’s sell-off is surely overdone. The company’s plan to become one of the largest musical instrument retailers in Europe still feels both realistic and achievable given the quality of its online offering, hugely positive customer feedback and growing presence in a highly fragmented industry. The oversubscribed £4.2m fundraise back in May was also a huge indication of how confident institutional investors are in the company’s long term prospects. 

It’s never pleasant to see a holding plummet so far in one day but my belief in Gear4music remains as solid as ever. Indeed, although a forecast 31% rise in earnings per share in 2018/19 will still leave the company trading at a heady 60 times earnings, I regard today’s fall as an excellent opportunity for growth focused investors to build a position.

Game on

Although a degree of profit-taking appears to have already commenced following yesterday’s superlative 19% rise, I simply can’t see shares in Keywords going anywhere but up over the medium-to-long-term, such is the potential for companies operating in the hugely lucrative gaming industry.

Yesterday’s ahead of expectations half-year update made for very pleasant reading. In the six months to the end of June, revenues grew by 50% to €63.7m and adjusted pre-tax profits by 60% to €9.6m. With one exception due to tough prior year comparables, all of the company’s service lines registered organic growth on a like-for-like basis.

Much of my bullishness on Keywords is due to its acquisition-friendly nature. The Dublin-based business has made four purchases since the beginning of 2017 alone, including one that allows it to enter the market for video games-related software engineering services. Given the €35m credit facility agreed with Barclays back in April, I suspect this spree will continue over the remainder of the financial year, such is the firm’s goal of becoming the go-to company in its niche.

The valuation of 45 times forecast earnings may look seriously high but given the potential growth that lies ahead, it may still be a price worth paying.

The post Why I’d still buy ‘overvalued’ multi-baggers Gear4music Holdings plc and Keywords Studios plc appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers owns shares in Gear4music and Keywords Studios. The Motley Fool UK has recommended Keywords Studios. 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.

Before I answer that, I’ll offer a few words of caution. Over the 30 years of my investing career, people have asked me many times for tips for shares that will double, treble and more in a very short time. But I always tell them I don’t know of any (if I did, I’d be retired now) and that all I can suggest is some that stand a good chance of doing it over the next 10 years or more.

So what is it?

What is a multibagger? If a share price climbs by 200%, is that a 2-bagger? Is a 500% gain a 5-bagger?

Actually, no, that’s not what investors usually mean. What you need to do with a share that has gone up is divide the current price by the original price, and that’s how many “bags” you’ve got. So if a share has risen from 100p to 200p, dividing it gives you 2, and you’ve got yourself a 2-bagger — it’s gained 100%, it’s 2-bagged.

And it works like that all the way up. If a share price has trebled, it’s a 3-bagger and it’s gained 200%. Likewise, a gain of 900% (for example, from £1 to £10) is a 10-bagger and a 1,000% gain gives you an 11-bagger — and a 10,000% gain is a 101-bagger, not a 100-bagger.

The harder question

Now to the difficult bit — how do you find a multibagger for yourself?

If you ask investors who bought into mining explorer SolGold a year ago and are now sitting on a very nice 11-bagger, or oil & gas exploration firm Sound Energy which has 5-bagged over 12 months, you’ll probably find two things.

Firstly, they’ll most likely be speculative investors who really can handle a bit of risk, and wouldn’t have turned into gibbering wrecks if they’d lost their stake. And as a consequence of that risk, they’ll most likely be diversified with their fingers in a lot of investment pies to minimise the damage done by one going bad.

So for every enviable short-term multibagger you see, there’s likely to be a lot of lwho have fallen by the wayside. Is this a strategy that’s likely to win in the long term? For most people, no.

Or perhaps not so tricky

So what if, instead of looking for get-rich-quick punts, you put your money into big solid companies with proven track records? Think that will rule out your chances of finding multibaggers?

Well, if you’d bought shares in ARM Holdings in August 2006 and kept them until the chip designer was taken over by Japan’s SoftBank a decade later, you’d have seen your share valuation soar from around 120p to 1,700p — and that’s a 14-bagger!

And you really don’t need a high-tech growth stock to do it either — even shares in plodding old Unilever have 13-bagged since 1988.

And that leads me to the really key factor that separates the successful multibagger investors from the wannabes — time.

The post Multibagger stocks defined appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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