The Motley Fool

Why Shares In AVEVA Group Plc Spiked Today

Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.

What: Shares of AVEVA (LSE: AVV) — not to be confused with mega-insurer Aviva — soared by 12% this morning after beating market expectations in its annual results.

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The company, which provides engineering data software for the likes of Shell and Siemens, boosted revenues by 8% to £237m for the year, generating £52m of cash in the process.

So what:  AVEVA may not be a household name, but among investors, its reputation is growing — the company delivered an operating margin of 29% in these results, earning a return on capital of more than 18%.

Apart from a one-year blip during the financial crisis, AVEVA has now grown its sales and profitability every year since 1997, a remarkable feat.

This was just “another year at the office” for AVEVA it seems, which has made a habit out of quietly producing impressive returns for its shareholders.

Now what:  That doesn’t mean AVEVA isn’t already highly rated by investors of course. Despite losing nearly 30% of their market value since last summer, the shares have rarely looked inexpensive, and even before today traded on a forward P/E of 22.

Management's renewed positive outlook may give existing shareholders a good reason to hang onto their AVEVA shares -- but does its lofty valuation rule it out of the running to be the "Motley Fool's Top Growth Stock"?

AVEVA certainly has a lot of qualities we look for in a growing, profitable business. In this free and exclusive report, we unveil our favourite growth prospect for 2014 and beyond -- and the company we've picked might just surprise you...

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Mark owns no shares mentioned in this article.