Why the Netcomm Wireless Ltd share price soared 25% today

Credit: Jason Howie

Small-cap technology business Netcomm Wireless Ltd (ASX: NTC) has soared 25% today and has nearly quadrupled in value over six months from just 55 cents to $2.10 today.

The company specialises in providing wireless internet network coverage via routers to remote Australian communities where there is no fixed internet coverage available via traditional ADSL or fibre infrastructure.

It is also moving into wireless machine-to machine communication technology that is commonly touted as the next big global technological trend (after cloud computing) under the loose term of the “Internet of Things”.

In this space, Netcomm Wireless’s broadband devices and technology can connect to 3G or 4G internet networks to allow a vast range of common everyday devices to be remotely controlled in real time from any computer at any location.

The stock posted a decent financial year 2015 with revenues up 11% and EBITDA up 39.8%, although it’s the chairman’s boasts about the strong outlook at today’s AGM that appear to have put a rocket under the share price.

At the AGM the chairman described the outlook as “extremely good” and “never been better”, with the prospect of another strong year of growth ahead.

This super-optimistic disposition appears matched by investors who have bid the shares up 25% to $2.10 today to ascribe an approximate market value of $217 million to a company that turned a net profit of just $2.64 million in the last financial year.

The business appears to have an ebullient chairman, some tailwinds and operates in growth industries, but it’s far from the only player in these spaces and at these frothy valuations the stock looks one to watch from the sidelines.

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below.

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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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