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This stock has returned 180% in three years. Is there still time to buy?

Three years ago, RWS Holdings (LSE: RWS) was a relatively unknown business. Then in 2016, growth took off and, since then, the company hasn’t looked back. 

For full-year 2015, RWS reported revenues of £95m. By 2016 this figure had risen to £122m, and for 2017, the group reported total revenues of £164m. As sales and profits have boomed, so have the company’s shares. Since the end of 2015, the stock has returned 174%, outperforming the FTSE 100 by 164% over the same period. 

Still time to buy?

After such an impressive performance, at first glance, it appears as if the opportunity to profit from RWS’s success has passed.

However, on closer inspection, I seem that the opposite is true. I reckon the firm’s growth isn’t going to slow down any time soon, and there could still be plenty of upside left for investors buying today. 

According to the company’s year-end trading statement, published this morning ahead of full-year results, management is expecting the enterprise to report revenues of “not less than £305m” for fiscal 2018, compared to £164m in 2017. That’s year-on-year sales growth of at least 85%. 

The City was expecting the firm to report sales of around £300m for the year, so it looks as if the company is set to beat analyst expectations for growth on both the top and bottom lines. Analysts have pencilled in earnings per share (EPS) of 17.3p for the year, giving a forward P/E of 26.7. 

Room left to run 

This multiple is right at the top end of what I would consider to be appropriate for a growth stock. But RWS isn’t your average growth stock. The company is a world leader in the very niche business of patent translations for the intellectual property and life sciences industries. 

On top of these services, the company also provides “high-level specialist language services” in other technical areas. The group is using its position in these markets to expand into other sections of the tech space. For example, last year it acquired Moravia, a leading provider of technology-enabled localisation services to some of the largest tech businesses in the world. 

This is unlikely to be the last significant acquisition for the firm. RWS is throwing off cash from its high-margin legacy operation, which it’s using to fund the growth of the rest of the group.

To give some example of how profitable the firm is, at the end of its fiscal first half, RWS reported £83m of net debt. According to today’s update, net debt has since declined to £66m. As well as acquisitions, it looks as if the group’s organic growth is also set to continue. In today’s update, the company notes that it’s seeing “increasing momentum across the business which underpins our confidence in delivering further significant progress in the new financial year.” 

The bottom line 

Overall then, it looks to me as if RWS remains a ‘buy’ even after its recent performance. As organic growth picks up and the group continues to expand its offering with bolt-on acquisitions, I believe there’s a strong chance the shares could even go on to double again from current levels.

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Rupert Hargreaves owns no share 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.