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Why the Vmoto Ltd share price is 7.9% higher today

Electric scooter business Vmoto Ltd (ASX: VMT) climbed nearly 8% in morning trade after the company announced an unaudited underlying profit of $1.6 million on unaudited revenues of $24.9 million for the six months ending June 30 2015. The underlying profit is more than double the prior corresponding period as profit growth heavily outpaced revenue growth.

The company stated it now expects to achieve previous guidance of full year profit between $5 million to $7 million for its 2015 financial year, which is recorded over the calendar year.

The environmentally friendly scooter manufacturer has long aimed to grow high margin international sales and today’s result suggests a shift in the sales mix to international from China is starting to pay dividends.

China’s population of 1.3 billion is obviously an attractive market by virtue of its size alone, although Vmoto has no shortage of low-cost competitors in the scooter market in that country. Chinese sales have been on a moderate growth trajectory though and international sales have some promising momentum.

The business recently suggested it expects to sell over 93,000 two-wheel units in 2015 and has some characteristics of a promising small-cap growth stock.

Selling for 41 cents it has a market value around $59 million, which would appear cheap given the company is forecasting profit of between $5 million to $7 million for calendar year 2015. It would be especially cheap if the company is able to hit the upper end of that guidance with an outlook for more sales internationally. Although given the most recent half-year numbers sales would presumably need to accelerate in the second half to meet guidance.

Despite some potential the stock still carries some considerable risks in my opinion and is best left on investors’ watch lists for now.

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

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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