Real-Life Investing: Small-Cap GVC Holdings plc Is Rocketing

Hasn’t the World Cup been fantastic? I think it’s been the best, and most exciting, I have ever watched.

rooneyDefinite winners at this World Cup

Whoever wins this World Cup, you can be sure that betting companies will do well. But which would be my pick?

Well, I’ve recently bought into a company that has been rocketing, and has a prime position in the online betting industry. You may not have heard of GVC (LSE: GVC), but this company owns brands such as Sporting Bet and Paradise Poker in markets across Europe and Latin America. These businesses were once loss-making, but are now highly profitable.

This business aims, through a combination of acquisitions and organic growth, to ride the wave of the online betting boom, and the trend in online betting is for long-term growth.

The turnaround in the fortunes of this company, plus growth in the online betting industry, has meant that the share price of GVC has quadrupled since the lows of the Eurozone crisis. Yet despite these increases, the company is still cheap, with a 2014 P/E ratio of 7.9, falling to 7.7 in 2015, and a dividend yield predicted to be 8.8, and increasing to 9.5.

Growth and value

So we have a company that is still growing, yet is cheap and has a stonking dividend yield to boot. Plus there is hardly any net debt. This firm is now one of the highest yielding companies in AIM.

Although growth in the next few years may be slowing, the strength of the fundamentals has encouraged me to buy. I see this company as an ideal blend of growth and value, and I have added this to my portfolio of small cap shares. Even if we see no growth in this business at all, the dividend yield and this firm’s inherent value means that this business is a buy.

A quick comparison with other companies shows why GVC appeals to me. William Hill (LSE: WMH), historically the leader in this business, has a P/E ratio of 11 with a dividend yield of 3.6. This business is known for its betting shops, but is trying to grow its online business, too.

Betfair (LSE: BET) is the leading online betting company in the UK, but a P/E ratio of 21 is expensive.

Overall, my view is that GVC is the pick of these investments — this company is a clear buy.

Have the prospects of GVC captured your attention?

A rocketing growth share can make all the difference to your portfolio. Alongside this growth comes inevitable volatility. But if can ride out the highs and lows, then growth companies could make a worthwhile addition to your portfolio.

And we at the Fool have uncovered a company which we are so confident about we have written a free report about this prospect.

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Prabhat owns shares in GVC.