Good morning. Apologies for today's report being a little later than usual.

dotDigital (LON:DOTD) is an email marketing software company which has been mentioned here before several times by myself, and also Marben100 and StrollingMolby. They presented to investors at the ShareSoc Tech Seminar in the spring of this year, and I remember being impressed with their growth, and a very impressive client list. Although I did have some concerns over the longevity of this type of product.

They have issued a positive-sounding trading update this morning, which has boosted the share price by 12% to 17.88p. The statement says that the company has looked at a number of potential acquisitions, but not found anything likely to create shareholder value. Instead they plan spending up to half their cash pile of £6.1m on driving accelerated organic expansion.

In the core division, turnover grew by 28% to £12.2m for the year to 31 Jun 2013.

As with most software companies, they quote EBITDA, in this case for the full year ended 30 Jun 2013 they expect to be "slightly ahead of the current market forecast (of) £3.8m". Last year they capitalised £1.2m in intangibles, so assuming no change, then profit as I would look at it (i.e. taking out amortisation charges, and adding back capitalised development spending) is probably around £2.6m. Take off tax, and you're in the £2m ballpark. So the £50m market cap after today's rise in share price is an earnings multiple of around 25. That seems very pricey to me, even allowing for the net cash, and the fact that the company has a good growth track record.

It might well grow into this rating over the next year, but personally I don't like paying too much up-front for growth, so the price is too high for me to take it any further. Also, I still have a nagging feeling that email is a bit old hat. Personally I unsubscribe from as many email lists as possible, as so much time is wasted every day constantly reading & replying to emails, it must take up about half my working time at a guess. Other people must surely feel the same, so I think there are better ways for companies to communicate with their customers other than email (e.g. social media). Email just strikes me as a scatter gun…

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