This stock could give you a ‘jumbo’ return

This fast-growing small cap has announced exciting plans to expand internationally. The shares could be a good gamble.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Jumbo Interactive (ASX: JIN) is a relatively tiny company – tipping the scales at just $70 million – in the online lottery business.  The company’s business model involves earning a percentage of lottery ticket sales. In Australia, it operates the popular site, among others.

For growth-oriented investors, this small cap is worth a closer look.

Huge growth to date

No one ever said Aussies don’t love to gamble. The company’s revenue has grown from a scant $22,000 in the year 2000 to over $25 million by 2012, while net income has risen from steep negative territory to top $5.7 million.

Over this period, Jumbo shares have vastly outperformed the S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO), as well as typical investor favorites like Commonwealth Bank (ASX: CBA), Wesfarmers (ASX: WES) and BHP Billiton (ASX: BHP). Simply click the chart below for a larger view.


A long runway ahead?

But it’s the company’s future plans and international expansion that are most exciting. Just this week, Jumbo announced it had signed a deal to expand into the United States, entering an agreement to supply lottery promotion programs to about 1,000 total American convenience stores through a joint venture with Retail Gaming Solutions. The company is also expanding into Mexico and Germany.

Summarizing these moves, the company has said, “Jumbo has recently expanded from the A$4 billion Australian lottery market into the A$64 billion North American and Latin American lottery markets, increasing the population base from 22 million to 400 million people…In addition to this, Jumbo is in the process of establishing operations in the $8 billion German lottery market to increase the population base a further 80 million to 480 million people.”

The bottom line for investors

An investment in Jumbo Interactive is by no means a sure thing. Still, it may be a better play than a lottery ticket. Not only are the growth prospects in the years ahead particularly exciting, shares of Jumbo Interactive appear cheaply priced today, trading at just 12 times earnings.

Two more of Australia’s most promising small companies are also flying under the radar. Discover these two exciting ASX investments in our brand-new special FREE report, “2 Small Cap Superstars”. Click here now, it’s free!

More reading

Motley Fool contributor Catherine Baab-Muguira does not own shares in any company mentioned here.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »