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Is XLMedia PLC Now A Buy After Announcing Record Results?

Digital marketing services provider XLMedia (LSE: XLM) issued a record-breaking set of interim results today for the six months ended June 30, 2015. 

The company announced that revenues had jumped 85% year-on-year to $36.8m, and gross profit had followed suit, up 63% to $18.4m. Adjusted earnings before interest tax depreciation and amortization increased 103% year-on-year to $12.9m. Profit before tax surged 187% to $13.2m as the company benefited from $2.4m of finance income. 

Management is so pleased with the company’s current trading performance that it has declared an interim dividend of 2.6 cents per share for the period. The total dividend payout will amount to $5m. XLMedia had cash and short-term investments of $43.2m at the end of June. City analysts expect the company’s full-year dividend payout to amount to 2.7p per share, a yield of 3.8%.

Commenting on today’s results, Ory Weihs, Chief Executive Officer of XLMedia said: 

“We made significant progress with executing our strategic plan, with acquisitions of performance marketing companies as well as bolt on publishing assets. These acquisitions complement the Group’s existing business and add diversification through the addition of more clients, products, regions and marketing channels.”

“The Board is extremely confident of meeting expectations for the full year.”

“We believe we have a set of strong foundations underpinning the growth potential of our business and we look to reporting on our continued progress.”

On course for growth 

XLMedia’s management believes that the company is well-placed to maintain this current rate of growth throughout 2015. Over the past 18 months, XLMedia has been focused on executing a number of growth initiatives, including select bolt-on acquisitions, organic growth and investments in technology. 

Moreover, with a cash rich balance sheet, XLMedia has the firepower to maintain its “growth through acquisitions” strategy without taking on any additional debt. During the first six months of the year, XLMedia generated $12.2m in cash from operations, a cash conversion ratio of 92%. 

City analysts expect the company’s earnings per share to expand by 51% this year, to 5.8p. XLMedia already seems to be well on the way to hitting this target. Covered back into sterling, XLMedia reported earnings per share of 3.8p for the six months to June. 

In fact, today’s figures indicate that XLMedia could be on track to surpass City forecasts this year. Indeed, if XLMedia repeats its first half performance the group could earn 7p per share for 2015, which would leave the shares trading at a forward P/E of 10.4. 

Lowly valuation 

Overall, XLMedia is a cash rich, high growth play, and based on the company’s current valuation, it also looks as if the company is severely undervalued at present. 

For example, based on City forecasts, XLMedia’s earnings per share are set to grow by 51% this year, which means that, after factoring in the company’s low forward P/E, XLMedia’s shares are currently trading at a PEG ratio of 0.2. 

Further, XLMedia is currently trading at a significant discount to its media sector peers. The wider media sector as a whole trades at a P/E of 21.5. 

Foolish summary 

All in all, XLMedia looks like an undervalued company worthy of further research, and to help you research the company yourself, our top analysts have put together this new report.  

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.