Why the Aconex Ltd share price is climbing higher

Shares in Aconex Ltd (ASX: ACX) have soared 5.8% higher today despite what is widely regarded as one of the ASX’s hottest growth stock releasing no news to the market.

The business operates in the construction industry but staff don’t get their hands dirty, rather they sell software and cloud-based solutions to help efficiently manage large construction projects online.

Aconex only hit the ASX boards just over a year ago and since then has risen an incredible 175% or so to $4.95 as investors bet it can build a profitable niche for itself in the digital future of giant construction projects.

For financial year 2015 normalised revenues were $82.4 million with an EBITDA of $3 million and a net loss of $2.5 million.

This then may lead investors to think that the remarkable share price rise and current valuation around $790 million look rather over the top. The expensive-looking valuation is based on the theory that the company will keep growing revenues and earnings via scale, product breadth and a fast-growing client and global project list.

The global construction and infrastructure industry does involve eye-watering amounts of capital however, with the company involved in a US$36 billion project for Qatar rail and $40 billion project to construct a man-made pleasure island in Abu Dhabi containing a Formula 1 track among many other gaudy extravagances.

Despite the tailwinds, overseas earnings, and large global markets it seems that almost all of Aconex’s potential is priced into today’s share price of $4.95.

Others in the software and cloud services space that may offer better value at current prices include little known cloud-services provider Bulletproof Group Ltd (ASX: BPF), or human-resources digital platform administrator Reffind Ltd (ASX: RFN).

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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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