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Nearmap Ltd skyrockets: Is it time to buy?

What: It’s a great day to be a shareholder of small-cap superstar Nearmap Ltd (ASX: NEA). The shares skyrocketed as much as 8 cents or 20.5% to be trading at 47 cents early in the session following the release of its financial results for the year ended 30 June 2014.

Nearmap, which is currently sitting on a remarkable 838% gain since the beginning of 2013, is a provider of ultra-high resolution aerial photographs and maps of Australian towns and structures which are proving to be incredibly useful across various industries.

So What: Financial year 2014 was a milestone year for Nearmap, which managed to generate a maiden profit after tax of $7.1 million compared to a loss of $1 million in FY13. Over the year, it released a number of new products including Rail, Solar, Property and Insurance, while it increased its coverage of the Australian market from 75% to 85%. In addition, it executed a license agreement with Google Maps and commenced test flights in the US market, which could prove to be a huge growth region for Nearmap in the future.

While the company also recognised strong growth in subscriber numbers, Nearmap managed to grow revenue by 62% for the year to $17.8 million, while adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose to $5.8 million, compared to a $0.2 million loss in FY13. It has targeted a $30-$50 million revenue run-rate by December 2015.

Here are some of the other highlights from the report:

  • Population coverage of 19.8 million
  • A total of 1.4 million kilometres captured
  • Receipt of new patents for aerial mapping system
  • Basic earnings per share (EPS) of 2.17 cents

Now What:

Many investors will look at today’s result and conclude that it is now too late to buy the shares, but I take a completely different perspective. Instead, I believe today’s results indicate that now is the perfect time to be buying. Sure, the shares aren’t as cheap as they were just yesterday afternoon, but the company is still so early in its growth days with plenty more to offer investors who buy today.

With a very optimistic outlook for FY15 as well as a strong cash balance of $23.3 million (and no debt), Nearmap is in a solid position to deliver market-beating returns over the coming years.

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Motley Fool contributor Ryan Newman owns shares in Nearmap Ltd and Google Inc (A shares).

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