As the nation descends into political turmoil (again), it makes more sense than ever to review your portfolio and check how comfortable you are with your holdings, particularly those that have made excellent gains over recent times.
Digital performance marketing company XL Media‘s (LSE: XLM) shares were priced at just 71p one year ago. They’re now 73% more expensive at 123p — fairly unsurprising when you consider that 2016 was “record breaking” for the Jersey-based company with revenue climbing 16% to $103.6m and pre-tax profits rising 28% to $31m.
Over the year that saw two seismic political events, XL achieved strong organic growth in publishing and “significant progress” in its media segment. Perhaps most importantly, the company continues to become more diversified in terms of who it does business with and where.
Its largest customer now accounts for 7% of total revenue, compared to 9% in 2015 and 15% in 2014. Given the problems that can arise from being too dependent on one client (step forward, Imagination Technologies), that can’t be a bad thing. Elsewhere, the company continues to become less reliant on the gambling sector, which represented 70% of revenues in 2016 (down from 83% in 2014). Given the political unrest in the UK, XL’s geographical spread is comforting with 32% of sales coming from Scandinavia, 27% from elsewhere in Europe and 21% from North America.
Post-period end, acquisitions of mobile platform ClicksMob and Canadian credit card comparison website, Greedyrates, also look sound. The former gives XL access to an established customer base in Asia. The latter shows its willingness to broaden revenue streams by entering the financial services sector.
On a price-to-earnings (P/E) ratio of just 12 for the 2017/18 financial year, shares in XL still look good value for those willing to accept that its listing on AIM makes it subject to less regulation than companies on the main market. It’s enjoyed enviable levels of returns on capital over the last five years, possesses a strong balance sheet and offers a 4.6% yield. It’s still a buy, in my opinion.
Quality…at a price
Shares in £2bn cap global life sciences firm Abcam (LSE: ABC) have almost doubled in the last year.
Last month, it reported that the final performance-related milestones relating to its acquisition of peer AxioMx in November had been successfully achieved. This follows on from strong interim results announced in March, including a 10% jump in revenue (constant currency). Positively, the company signalled its belief that this kind of performance was likely to continue for the rest of the financial year.
Abcam’s shares currently trade on a vertigo-inducing forecast price-to-earnings (P/E) ratio of 32, assuming earnings per share growth of 24% is achieved.
A check under the bonnet reveals a company with a growing net cash position and great free cashflow. Net profits have doubled since 2012 and the dividend — although negligible thanks to Abcam’s growth credentials — is regularly subject to double-digit hikes. While returns on capital and operating margins have drifted lower over recent years, these are still well above the market average. Moreover, the company’s global presence (it provides products to approximately 500,000 life science researchers around the globe) should make it fairly resilient if markets head south.
Overall, this strikes me as a great stock, albeit one that might be worth buying on any dips. It’s a hold for now.
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Paul Summers has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.