Here’s why the Nearmap share price is nearing $3

The Nearmap Ltd (ASX: NEA) share price hit a record of $2.88 this week as investors continue to pile into one of the ASX’s most promising software-as-a-service growth stories.

The stock printed as high as $2.88 on Thursday and is now up around 200% over the past year alone. One reason it may be rising is because powerful market-moving index tracking funds will be required to buy it if it moves in the S&P/ ASX200 Index (ASX: XJO) of Australia’s leading companies.

Given it now has a market value of more than $1.2 billion this looks likely, although buying shares in anticipation of a company joining or leaving a particular index for example is not a sound investment strategy.

Two of Nearmap’s largest individual shareholders in founder Ross Nogard and director Cliff Rosenberg took advantage of the recent price rises to sell large amounts of shares on market on February 21 and February 27. While director selling is never a positive, both still retain huge stakes and Nearmap’s success remains largely leveraged to its performance in Australia and the US.

Other fast-rising shares in the SaaS space include Xero Limited (ASX: XRO) and Pushpay Holdings Ltd (ASX: PPH).

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Motley Fool contributor Tom Richardson owns shares of Nearmap Ltd. and Xero. The Motley Fool Australia owns shares of and has recommended Nearmap Ltd. The Motley Fool Australia owns shares of PUSHPAY FPO NZX 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 Scott Phillips.

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