The iSentia Ltd (ASX: ISD) share price has plunged more than 10% today to $3.93 in lunchtime trading, despite a rock solid first half result.
Year-to-date, the share price is down more than 18%, compared to the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) fall of less than 6%.
iSentia provides media information and intelligence to more than 5,500 public and private sector clients, capturing data from 5,500 mainstream media outlets, not to mention thousands of online news sources and millions of social media pages.
Here's a quick summary of the first half of the 2016 financial year's results…
- Revenues up 22% to $75.8 million compared to the previous year
- Underlying net profit (NPATA) up 22% to $14.9 million
- Dividend up 19% to 3.7 cents from 3.1 cents last year franked at 50%
- Earnings before interest, tax, depreciation and amortisation (EBITDA) up 19% to $23.5 million
- Asia achieved 33% growth in EBITDA compared to the same period last year
So what?
It seems the market weren't too happy that the company's Australia and New Zealand software as a service (SaaS) results rose by just 2% compared to the previous year, and EBITDA was up just 6%. This is the company's core region, so growth here is important until its Asian business reaches a similar scale.
Expenses also increased at a faster pace than revenues leading to lower EBITDA margins, which may have spooked investors. But the increase in costs has been driven by the acquisition of King Content last year, cloud platform investment, Asian management team and additional highly skilled employees – all of which are likely to drive further growth in future.
Now what?
iSentia expects to report revenues of between $155 and $158 million for the full 2016 financial year (FY16) – up more than 22% compared to last year – and EBITDA of between $50 and $53 million (up more than 18% compared to last year).
Foolish takeaway
Growing revenues and earnings at double-digits is no mean feat, but that's what investors are expecting from iSentia. I suspect many had expected higher growth in the bottom line (compared to revenues) rather than lower growth given the company's leverage – hence today's selloff, but that might be an opportunity.
At the current price, shares are trading at an FY16 P/E ratio of around 23x, which appears to be a cheap price if the company can continue generating strong growth in earnings.
