Here’s why growth share RXP Services Ltd exploded higher today

It certainly was a great day for shareholders of RXP Services Ltd (ASX: RXP). The shares of this technology consulting services company have surged higher by 7% to 77 cents today after it announced strong full year results.

Last year management provided FY 2016 sales guidance of $105 million. That in itself would have undoubtedly been a great result and a big increase from the $78.9 million sales it posted in FY 2015. But this morning the company far exceeded its own expectations and delivered sales growth of 61% to $127.1 million.

Even better was the fact that improvements in its operating performance meant underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) increased at an even higher rate of 71%. This meant full year underlying EBITDA came in at $18.2 million, with earnings per share a strong 7.6 cents.

The company has made a series of successful acquisitions during the year which has of course been a boost to sales. But according to its earnings presentation organic growth accounted for 29% of sales growth this year, which is impressive in my opinion.

With strong demand for its services persisting, management is confident that sales will grow by at least 10% to 15% in both FY 2017 and FY 2018. As well as this, it believes its strong balance sheet leaves it well placed to make strategic acquisitions that enable it to grow inorganically and build capabilities in areas of high demand.

At the current price its shares are trading at just over 10x earnings and providing a fully franked 3.9% dividend. I believe this makes RXP Services an attractive investment and a better option for investors than its rivals SMS Management & Technology Limited (ASX: SMX) and DWS Ltd (ASX: DWS).

It is worth remembering though that the industry it operates in is very competitive and has low barriers of entry. But even when taking that into account I feel quite sure that this could be a bargain buy.

Finally, before making an investment in RXP Services or any other share I would highly recommend taking a look to see if you own one of these wealth-destroying ASX shares. They could be harming your portfolio and might be best swapped out if you ask me.

3 Rotten Shares to Sell, and 1 to Buy Today

After a double-digit rally for the ASX since 2016 lows, investors should be on high alert. You'll find a full rundown below of 3 shares we think you should avoid today plus one top pick worth buying, even if the market turns south and the RBA keeps rates at an "emergency low." Simply click here to uncover these stocks.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.