Even taking into account recent market volatility, the past year has been a great one for equity indices the world over. But even though a rising tide lifts all boats, there have been a few stocks that have stood out from a very impressive fleet.
One is automation software provider Blue Prism (LSE: PRSM), whose stock has risen over 230% in the past year. It’s no surprise that the market has embraced the company with such fervour, given the attention everyone is now paying to the possible benefits (and downsides) of automating an increasing number of jobs.
And Blue Prism is targeting a wide swathe of white collar jobs with its software that it says will cut costs by eliminating repetitive tasks that are currently undertaken manually by ever-more expensive human employees. This makes it easy to see why companies are interested in Blue Prism’s services.
And interest is being carried over into firm contracts as Blue Prism’s revenue grew a whopping 155% in 2017 to £24.5m as the group secured more extensive deals with existing partners, brought on board new ones and opened offices in new regions of the globe.
However, opening new offices and making new hires is an expensive process and the group’s operating losses increased from £5.3m to £9.5m year-on-year. With £16.3m in cash on hand at period-end, the business is okay for now but will likely need to tap shareholders or debt markets for more cash to support this rapid growth before long.
For investors, that may be just fine as long as corporate customers find Blue Prism’s software a reliable means to trim costs. And with its software becoming ever more capable, I reckon the company’s stock price could be in for another great year.
Unlocking next level growth
An even bigger market gainer over the past year has been video game developer Frontier Developments (LSE: FDEV). The company’s stock price has risen an eye-watering 360% over the past year as its flagship game, Elite Dangerous, has broadened its once-niche appeal, while the company has made good progress with its other properties.
The second developed property, Planet Coaster, which gives players the ability to create their own theme park, continues to trade well and has the possibility to become a multi-game franchise over the years. And soon to be released is Jurassic World Evolution, which is a similar world-builder based on the phenomenally popular book and movie series that will come out this summer alongside the latest film instalment.
While investors wait for the new Jurassic Park game to launch, the group’s business is performing well with revenue rising from £18.1m to £19m year-on-year in H1 with EBITDA hitting £6m. The co-founder-led business plans to leverage this profitability and war chest of £29.1m in cash to fund expansion into other franchises, making it a force to be reckoned with as a self-publishing developer.
The fact that Chinese internet giant Tencent took a 10% stake in the business in July is, in my eyes, a great endorsement of this plan’s long-term prospects. And with a proven history of building highly successful and profitable games, I reckon Frontier Developments could be in for a great 2018.