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Why the 1-Page Ltd share price jumped today

Credit: Matt Biddulph

Shares of 1-Page Ltd (ASX: 1PG) have bounced again today, rising another 4.4% after yesterday’s 16% pop. However, they’re still trading well below their 52-week and all-time high of $5.69 recorded in September this year.

So What: 1-Page is a Silicon Valley-based company that provides cloud-based human resources from a software-as-a-service (SaaS) platform.

To put it simply, the company’s products allow companies to individually rank and prioritise applications for employment positions by asking applicants to solve real-time business challenges instead of requiring resumes. The process is said to save both time and money for the company.

While it certainly has the potential to disrupt bigger players such as SEEK Limited (ASX: SEK) or even LinkedIn, the share price had arguably become overly inflated. For instance, its most recent quarterly cash flow statement showed just $98,000 of receipts from customers (and negative $2.755 million in net operating cash flows) for the period, while it generated just $158,900 in revenue in the six-month period ended 31 July 2015.

Weak revenue and earnings results are common amongst tech start-ups, as are negative cash flows as those companies burn through cash in order to grow more rapidly and stay ahead of any potential competitors. Still, the company needs to start showing some indications of improvements in those financial measures in order to appease investors.

Now What: Although it still has plenty of work left to do, 1-Page has made progress. For starters, it recently announced nine new annual contracts for its Sourcing Platform together with a signature from Starbucks, which will also join the Platform.

In a separate announcement today, 1-Page announced $1.39 million in new bookings as of 30 December 2015 and said it remains on track to deliver 30 annual enterprise contracts by the end of January. The company said:

“As a direct result of the success and traction 1-Page is experiencing signing large enterprise clients to annual contracts, the major focus continues to be on the efforts to close these enterprise accounts. 1-Page has more than 20 Enterprise and Global Enterprise accounts in final stages of procurement with annual agreements. 1-Page has an additional 50 prospects with a high probability to move into procurement during the next few weeks.”

Notably, an enterprise client is one with 3,000 to 10,000 employees while a global enterprise client is one with more than 10,000 employees. These are the most lucrative signatures being targeted by the company.

Foolish takeaway

Shares of 1-Page still aren’t cheap and the company still has a long way to go to justify its share price. While it might be a risky investment prospect, it’s certainly one worth keeping an eye on and could be worth a much closer look – especially if its shares do fall any further.

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The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of LinkedIn and Starbucks. Motley Fool contributor Ryan Newman owns shares of 1-Page Ltd and LinkedIn. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest.

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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