Is Iomart still a growth stock opportunity?

Thursday, Nov 29 2012 by
Is Iomart still a growth stock opportunity

Cloud computing and datacentre specialist iomart (LON:IOM) produced a set of half year results that beat market expectations this week. For a company that has routinely delivered robust growth figures over the past three years, it was a performance that one broker described as “relentlessly positive”. But for many investors – particularly those that got their fingers burnt in the tech bubble – fast growing technology and telecoms companies generally carry a health warning these days. So how confident could investors be about a company like iomart? 

In late 2010, long before Stockopedia’s advanced stock screening techniques had been developed, we spoke to iomart’s chief executive Angus MacSween about his plans to grow the company. That year the share price had risen from 50p to 90p and he was confident that as more SMEs and corporates embraced the advantages of third-party managed hosting and data storage, iomart was well placed to capitalise. Since then the company has bolted on a couple of acquisitions, added new clients and squeezed more revenue out of existing customers. 

Anticipation of the latest interim figures – which saw revenues grow by 29% to 19.9m and adjusted PTP rise 66% to £4.9m – pushed iomart’s share price above 200p for the first time in its history. On just about every valuation metric, that price looks relatively expensive; for instance the forward P/E is 22.7x versus a sector average of 13.2x (see iomart’s stock screen here). At that sort of multiple, iomart is plainly way off the radar for value investors; and with only a very modest dividend (that fell slightly last year) income hunters probably won’t be interested either. In many respects, iomart fits the profile of a growth stock but currently it only qualifies for one of our guru growth screens – a screen that is performing particularly badly this year. 

Screening for growth 

We recently took a look under the bonnet of the investing formula developed by US strategist Charles Kirkpatrick. Using fundamental indicators and price momentum Kirkpatrick developed three mechanical stock selection strategies spanning bargain, value and growth stocks. Of those strategies modelled by Stockopedia, the growth formula has barely broken even so far this year – but it is the only screen that iomart currently qualifies for. It does so by just scraping over the £200m market cap requirement…

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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>

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iomart Group plc is a holding company. The Company is engaged in providing secure managed hosting and cloud services. The Company operates through two segments: Easyspace and Cloud Services. The Easyspace segment provides a range of shared hosting and domain registration services to micro, and small and medium-sized enterprises (SME) companies. The Cloud Services segment provides managed cloud computing facilities and services, through a network of owned datacenters, to the larger SME and corporate markets. The Cloud Services segment uses various routes to market and provides managed hosting services through iomart Hosting, RapidSwitch, Melbourne, iomart Cloud Services, Redstation, Backup Technology, ServerSpace and SystemsUp. Its products include CloudSure Hosting Solutions, Managed Services, Storage, Network and Control Panel. It provides Infrastructure as a Service platform and EMC Avamar Cloud Backup for LabVantage Solutions, Inc., a global laboratory informatics provider. more »

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About Ben Hobson

Ben Hobson

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