For many of us in the Western world, access to the internet is a fundamental part of our daily lives. Catching up with people over email or social media, purchasing goods, paying bills, learning new skills or playing games. More and more of us are doing this online.
With our lives becoming more integrated with the internet, and more of our personal information available online, it has become ever more important for businesses to protect themselves and their customers from fraudulent activities.
Now this is an area where AIM listed Software & Computer Services business, GB Group enter the frame. They provide industry leading identity data intelligence services to a range of customers including the DVLA, The National Lottery, Black Horse, Waitrose, MoneySuperMarket.com, Marie Curie, Dixons Retail and William Hill.
So what do GB Group do?
With so much information available on each of us online, GB Group focus on understanding the data in order to build our online profile – what we like and what we don’t. To do this, the business combines trillions of data records from all over the world relating to people’s identity, and this in turn helps their clients make the right decisions about the customers they serve and the people they employ.
Their three key areas of operation are supporting fraud, risk and compliance management; managing data quality through location intelligence and customer behaviour insights.
GB Group: The fundamentals
The six brokers that are contributing towards GB Group’s future earnings forecasts are all very positive, offering a BUY rating across the board. With five years of consistent pretax profit growth since 2013, the consensus forecast for 2018 is expected to see an increase from £11m to £22.6m.
As a result, GB Group’s forward price/earnings ratio is sitting at 27.3x which isn’t as attractive as some of the growth stocks we’ve identified, but when this number is compared to it’s peers within the Software & Computer Services sector, it doesn’t look high at all. The PEG ratio is at 0.99 which suggests there’s plenty of earnings growth for the business over the next two years.
Gearing is under control with the quick ratio of 1.10 suggesting borrowings are well covered while interest cover sits at 23x.
With profit margins of over 13%, the business is making effective returns from sales, a figure that has improved steadily since 2013. Maintaining it’s efficient operating numbers, GB Group is providing an excellent Return on Capital Employed of 94.2%.
The share price is down by 12.3% over the last month, having eroded the majority of gains seen over a six month period. However, performance over 1 year, 3 year and 5 year periods has seen growth of 21%, 111% and 320% respectively.
Graph Source: Hargreaves Lansdown
In addition to this stellar five-year performance, the business is committed to paying a dividend too. We’ve seen it grow consistently since 2013 and this is expected to continue in 2018. The dividend yield last year was 0.62% and this is forecast to increase to 0.76%
Chief Executive, Chris Clark commented in this year’s annual report “I am confident in the direction we are heading as a group and I am looking forward to the year ahead.”
The question is, have we seen the best of GB Group’s share price growth for now, or is this a good time to buy?
If you have any thoughts, or questions, on this or any other of my other growth stock reviews, feel free to visit the Growth Stocks forum and have your say.
Do bear in mind this isn’t a recommendation to buy this stock. The above constitutes my opinion based on the research undertaken. I urge you to do your own research before you invest.
Check out other featured Growth Stocks
- NMC Health PLC [NMC]
- Burford Holding PLC [BUR]
- Vectura Group PLC [VEC]
- Treatt PLC [TET]
- Crest Nicholson Holdings [CRST]
- Telit Communications PLC [TCM]
- Universe Group [UNG]
- Inspired Energy [INSE]
My thanks as always to JD Financial Publishing for providing access to the Company REFS research tool. They are currently offering a 30-day free trial to this fantastic product and I would urge you take a look.