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Why the Wellcom Group Limited share price popped 9% today

The Wellcom Group Limited (ASX: WLL) share price rose 9% to $4.88 following the release of its first half results this morning. Revenue grew 3% to $76 million, and net profit after tax (NPAT) from continuing operations grew 5% to $6 million.

Earnings per share were up 5% to 15.21 cents, and the company paid an interim dividend of 10 cents per share along with a special dividend of 25 cents per share. Wellcom carries $0.1 million in debt and has cash of $6.4 million, resulting in a net cash position of $6.3 million.

During the year, the company expanded its Knowledgwell technology into the United Kingdom via Tesco, and established a full-service creative studio for Countdown in New Zealand. New contracts with Countdown, Tesco, and J.C. Penney (USA) contributed to the higher revenue result.

It was interesting to see that Wellcom also did work for BWX Ltd’s (ASX: BWX) Sukin brand during the half:

source: Wellcom presentation

Over the full year Wellcom aims to continue expanding its proprietary Knowledgewell (a marketing suite) software into new markets while also growing its market share. Management also stated that they are keeping an eye out for acquisitions, which could be another viable way to generate growth for a company with a strong balance sheet like Wellcom’s.

At $4.88 per share, Wellcom is priced at approximately 16x estimated full year earnings, which appears undemanding.

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Motley Fool contributor Sean O'Neill has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BWX Limited. The Motley Fool Australia has recommended Wellcom Group Limited. 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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