Is it too late to buy Bravura Solutions shares?

After reporting strong first half growth across all of its key financial metrics, shares in emerging fintech Bravura Solutions Ltd (ASX: BVS) have blown up. Is it too late for you to 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

Emerging Australian fintech company Bravura Solutions Ltd's (ASX: BVS) share price has started 2019 with a bang.

In a little over two months, Bravura shares have soared almost 50% higher from their December 31 price of $3.70 to be now pushing $5.50 as at the time of writing. And going back further tells an even better story: investors who snapped up shares at the beginning of 2018 would now be sitting on a gain of well over 200%!

What is driving the Bravura share price higher?

The big driver for the most recent surge in Bravura share price was the company's strong half-year results. It was really a shareholder's dream: the company posted strong growth across all of its key metrics, with barely a weak number in sight. Revenue for the six months ended 31 December 2018 was up 24% on first half FY18, which drove bottom line NPAT growth of 15%. But what was even more significant, in my opinion, was the fact that Bravura grew its recurring revenues by 31%. Recurring revenues made up 72% of total revenue for the half.

Combined with a strong net cash position of $14 million, margin expansion of 300bps in its wealth management business, and growth in both return on assets and return on equity, the strength of its recurring revenues provides Bravura with an incredible foundation from which to continue to pursue growth opportunities.

Why look at recurring revenues?

I've been banging on about recurring revenues for a while now because I think it is really one of the most important metrics for investors to look out for – particularly in a young company. Being able to lock in recurring revenues is so crucial to a growing business because it improves management's ability to budget. If the company can say with a great degree of certainty how much revenue it will generate in future periods, management can set aside cash to cover expenses and be able to estimate accurately the amounts it can then use to invest in new growth projects.

Management still has to be skillful enough to invest free cash flow in the right projects, but in my mind, it's no coincidence that market darlings and growth companies like Altium Limited (ASX: ALU) and WiseTech Global Limited (ASX: WTC) also have incredibly high rates of recurring revenues.

Should you invest in Bravura shares?

So the big question, as always, is: should you invest? When a company's shares have surged 50% higher in a matter of months it's pretty natural to think you might have already missed the boat. But Bravura is really going from strength to strength, and that big jump in its recurring revenues gives me faith that it is still very much in its growth phase.

The company's outlook for the remainder of FY19 is – as you'd expect – incredibly optimistic. Growth in scale and efficiencies across the business are helping to boost those ROE and ROA figures, and Bravura has a strong pipeline of sales opportunities across multiple geographies.

It's entirely possible that the Bravura share price might suffer some sort of correction in the shorter-term: a bit of herding mentality in the market may have pushed Bravura's share price into overbought territory, as can often happen when strong results put more focus on a small- to mid-sized company. But I believe that, over the longer-term, Bravura can continue to deliver solid growth to investors.

Motley Fool contributor Rhys Brock owns shares of Altium, Bravura Solutions Ltd, and WiseTech Global. The Motley Fool Australia owns shares of Altium, Bravura Solutions Ltd, and WiseTech Global. 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.

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 »