When investing in growth stocks trading at a high price-to-earnings ratio, volatility is to be expected. And when those growth stocks lie within the small-cap territory of the stock market, any sharp corrections can be even more dramatic.
That’s certainly been the case with Celebrus Technologies (LSE:CLBS) earlier this year, falling by over 20% in a single day following disappointing results. And until recently, the stock was down almost 50% since the start of the year.
The shares have since recovered, undoing some of this downward trajectory. But with Celebrus still trading firmly below its average earnings multiple, could investors be looking at a rare opportunity to snap up one of Britain’s few technology enterprises at a discount? Let’s take a closer look.
What’s going on with Celebrus?
As a quick crash course, Celebrus offers a unique real-time analytics platform that allows businesses to monitor how customers interact with their websites and apps. However, the key difference here is that Celebrus doesn’t rely on cookies, making it far more reliable than traditional analytic solutions and harder for web-goers to opt out.
The share price crash in April came as a result of a profit warning that full-year revenues were likely to be behind expectations. Geopolitical uncertainty, particularly within the trade landscape, resulted in delays and slower decision-making from businesses. And subsequently, Celebrus’ customers became more cautious in their spending.
This risk-averse behaviour resulted in extended sales cycles, hence why management revised down its full-year revenue guidance. Obviously, that’s frustrating. But at the end of the day, these delays aren’t a result of poor or faulty technology, but rather short-term economic headwinds. And this became perfectly evident in its subsequent results earlier this month, which sent the share price flying back up again.
Beating expectations
Despite a seemingly weak start to 2025, Celebrus’s full fiscal year results (ended in March) weren’t as dire as many had suspected. Annualised recurring revenue enjoyed a 13.9% boost, along with significant gross margin expansion, and a 28.6% surge in earnings per share.
Management also successfully secured two new major contracts, including a three-year deal with a European bank, and another three-year deal with a US fintech firm to optimise its trading platform. Combining all this with the launch of a new buyback scheme to repurchase 500,000 shares (valued at just shy of £1m), it isn’t surprising to see investor sentiment improve.
Yet even with this recent boost, the stock continues to trade at a discount. The business has proven to be far more resilient to the macroeconomic landscape than previously expected. But that could change in the future, if trade tensions continue to escalate.
At the same time, Celebrus has other weaknesses to consider. And perhaps the most significant is that its client list remains fairly concentrated, with revenue primarily driven by just a small collection of large contracts.
Nevertheless, given the long-term trends in analytics demand, this business seems to offer a unique solution that warrants closer investigation. At least, that’s what I think.
