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Why the iSentia Group Ltd share price is charging higher this week

Shares of iSentia Group Ltd (ASX: ISD) have continued to climb today to trade at $3.78, up almost 7% since Monday’s closing price.

When iSentia reported its half-year earnings results to the market in February, the company’s share price was hammered on the back of a mere 2% rise in its Australia and New Zealand software-as-a-service business, which is the company’s core region.

At the time, the company also guided for full-year revenue in the range of $155 million to $158 million – representing growth of between 22% and 24% compared to financial year 2015 – with earnings before interest, tax, depreciation and amortisation to fall within $50 million and $53 million. That would represent growth of between 18% and 25% from the prior year.

iSentia left those estimates unchanged when it presented to investors last week, but even that confirmation may have been enough to ease the market’s concerns regarding a slowdown in growth.

The strong forecasts may also be enough to convince investors that iSentia’s shares represent good value today. At $3.78, the shares are trading almost 24% below their high from December last year at $4.95. Although they still aren’t ‘cheap’, per se, iSentia is a company with strong growth potential.

As a media monitoring company, iSentia offers a service that is critical to most businesses. According to its update last week, it served 92 of the top 100 global brands, serving 5,000 clients and processing 282 stories per second whereby businesses need to know what is being said about them, when, and by whom.

Notably, the rapid rise of social media has made this an even more vital need for businesses, with iSentia developing new products and services to enhance their offering to those customers. iSentia said that it is now one of only 34 companies in the world with certification and access to Facebook Topic Data.

Indeed, it is these value added services that should enable iSentia to grow its earnings considerably over the coming years. It isn’t without its risks, of course, given the likely ability of global tech giants to offer similar services if they chose to do so, but iSentia has built a solid reputation and a strong customer base.

I currently own shares in the business, and think it is well worth the consideration of other long-term investors as well.

If iSentia doesn't appeal to you, however, there are plenty of other great ASX tech shares you could look at instead. One such business has recently been named The Motley Fool's Top Stock for 2016, and it stands to benefit from what some are calling one of the biggest new markets in the history of modern business. Simply click here to learn its name.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Facebook. Motley Fool contributor Ryan Newman owns shares of Facebook and iSentia Group Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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