Veda soars 60% — is it too late to buy?

Credit reporting and data services company Veda (ASX: VED) is still riding high on Monday morning after seeing its share price soar 40% last Thursday when the stock first traded post-initial public offering (IPO).

Veda’s IPO was priced at $1.25, however by the close of trade on Thursday the stock was trading at $1.75, providing an initial one day return of 40%. The stock price has continued to climb over Friday and today with the shares hitting a high of $2 on Monday morning and providing investors in the float with a gain (on paper at least) of 60%.

The debut and opening days of trading in Veda stock makes Veda’s IPO one of the most successful out of the recent string of IPOs. Website operator Freelancer (ASX: FLN) also had a stellar initial debut — the stock price has trended down since its listing but is still up around 100% on the float price of 50 cents.

Meanwhile electronics retail Dick Smith (ASX: DSH) and television network owner Nine Entertainment (ASX: NEC), which both listed on the ASX last week at $2.20 and $2.05 respectively, have had relatively muted listings and continue to trade close to their initial float prices.

Foolish takeaway

At $2 per share, the market capitalisation of Veda is nearly $1.7 billion, plus the company carries nearly $290 million of net debt, giving the firm an enterprise value of $1.99 billion.

According to the prospectus, management is forecasting pro forma earnings before interest and tax (EBIT) of $102.4 million for the upcoming 2014 financial year. This implies an increase of 24.7% on the prior year and represents an EV to EBIT multiple of 19.4.

While Veda may be a sound business and have good growth prospects ahead of it, at a multiple of 19.4 investors who missed out on an allocation in the float would appear to be paying a very full price to purchase stock at the $2 mark.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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