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Why the Mobile Embrace Ltd share price rocketed 30% higher today

Much to the relief of its long-suffering shareholders, the Mobile Embrace Ltd (ASX: MBE) share price is climbing higher at long last.

At the time of writing the digital performance marketing company’s shares are up over 30% to 6.4 cents.

Despite today’s gain, its shares are still down almost 60% since that start of the year.

Why are its shares higher?

This morning Mobile Embrace provided the market with a trading update which revealed that it has had a positive start to FY 2018.

According to the release, although it is still early in the year, management is confident that the company is well-placed to return to EBITDA growth in FY 2018.

In FY 2017 the company posted EBITDA of $5.4 million, down 43% on the $9.5 million EBITDA it delivered a year earlier.

This was the result of issues with the company’s Carrier Billing business that forced it to shift its focus to Performance Marketing.

While this has been a bit of a disaster for the company, its Performance Marketing business is a much higher quality business which enjoys higher margins and improved returns on funds employed.

Should you invest?

I think management has done a great job at saving the company amid the demise of its Carrier Billing business. However, I think investors ought to wait to see how the Performance Marketing business progresses over the next 12 months.

While things are certainly looking up for the company at the moment, it might just be a little too soon to invest.

In the meantime, investors may want to consider shares such as EML Payments Ltd (ASX: EML) and PUSHPAY FPO NZX (ASX: PPH).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of PUSHPAY FPO NZX. 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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