Impressive growth

Wandisco released its half-year results this morning, which showed an impressive 71% increase in revenue on the same period last year, maiden positive adjusted EBITDA and a move “significantly closer to our goal of becoming cash flow break-even.”

The company has an Original Equipment Manufacturer agreement with IBM and partnerships with Amazon Web Services, Cisco and Google Cloud (among others) to resell its patented technology. It said today: “The order book and sales pipeline continues to gather pace.”

Given the $9.7m revenue posted for the first half of the year and the positive momentum, I would anticipate upgrades to City analysts’ forecasts of $16m for the full year (trailing 12-month revenue is already up to $15.5m). Perhaps pushing $20m wouldn’t be entirely fanciful, certainly on a forward 12-month basis.

High profit potential

Today’s results certainly strengthen Wandisco’s credentials as a company with the potential to scale-up with minimal incremental increases in operating costs into a larger, highly profitable business. However, profitability remains some way off on current visibility, so I look to a sales (revenue) multiple for valuation.

As a rule of thumb, I’d only ever pay up to 10 times forecast 12-month sales. In the case of Wandisco, with its market cap of £265m ($345m at current exchange rates), I’d want sales of $34.5m at the very least.

As such, much as I like the business and its potential, I consider the stock too pricey at the present time, based on my $20m forward sales estimate. More adventurous investors than me may believe it can grow rapidly into its valuation and I certainly wouldn’t contest the possibility of that.

Under-the-radar turnaround

Operating nationally with 12 regional offices (and also some international consultancy work), North Midland Construction (LSE: NMD), which was founded in 1946, has somewhat outgrown its name. Its shares have soared from 140p to 420p over the last 12 months, turning a £5,000 investment into £15,000.

This FTSE Fledgling index constituent — now valued at £43m — is emerging from a difficult few years during which some ill-advised contracts ran their course. Under a new chief executive, the business is getting back on track. Half-year results last month saw EPS more than double, with four of the group’s five business segments (Construction, Power, Highways, Water and Telecommunications) delivering operating profits.

With trailing 12-month EPS of 30.93p and a dividend of 6p (scope for that to be increased rapidly), North Midland Construction has a price-to-earnings (P/E) ratio of 13.6 and running yield of 1.4%. I haven’t been able to find any broker forecasts, but with the board “anticipating enhanced like-for-like revenue growth in the second half of the year, coupled with an enhanced operating margin percentage,” the shares look capable of making further advances, if earnings continue to improve as seems likely.

The post 2 stocks that have turned £5,000 into £15,000 in just one year 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.