Here's why the Nearmap Ltd share price just skyrocketed

The Nearmap Ltd (ASX:NEA) share price has been one of the biggest movers in morning trade following the release of a positive business update. Should you invest?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Prior to today, in the last two weeks the Nearmap Ltd (ASX: NEA) share price had tumbled over 22% despite there being no news out of the aerial imaging company.

Concerns over its slower-than-expected progress in the lucrative U.S. market appear to be behind the sell-off.

But thankfully for its shareholders the company has attempted to quash these concerns with the release of a business update this morning.

In early trade Nearmap's share price has responded positively and jumped 18% to 52 cents.

Today's update revealed that so far in the third quarter of FY 2017 Nearmap is on track to post its strongest trading quarter year-to-date with the addition of $3 million worth of incremental annualised contract value (ACV).

Pleasingly both its Australian and U.S. businesses have grown incremental ACV ahead of their first-half run rate.

According to the release this was driven by a combination of new customer acquisitions, upselling to its existing customer base, and an increase in average revenue per customer (ARPC).

In its half-year results ARPC increased strongly to $5,500, so it is great to see this trend continue in the third quarter.

The other good news is that the company hasn't broken the bank to do so. Sales productivity has grown to be greater than 100%, meaning that each dollar the company spent in direct sales and marketing returned more than one dollar of incremental ACV.

But, despite the strong performance, management has held firm its full-year earnings before interest, tax, depreciation, and amortisation guidance of between $4.5 million and $6.5 million.

Should you invest?

Although its shares may still look expensive at 5x sales, I like Nearmap at today's price. If the company can make a success of its U.S. operations then I believe there is significant growth potential ahead for the company which more than justifies paying a premium today.

Whilst progress has been slower-than-expected, this latest update gives me confidence that things are falling into place now.

For this reason I would put it up there as one of the better tech investments on the market alongside the likes of Altium Limited (ASX: ALU) and XERO FPO NZX (ASX: XRO).

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of Altium, Nearmap Ltd., and Xero. 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.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »