The Jumbo Interactive Ltd (ASX: JIN) share price has seen a sharp increase since February 2019. It is currently trading 3.32% higher for the day at $13.38, just below its all-time high.
Jumbo Interactive is a major operator of internet services for lotteries in Australia. Popular lotto games retailed by Jumbo Interactive include Oz Lotto, Powerball and Saturday Lotto.
What drove the recent 75% increase in Jumbo Interactive's share price?
The recent rally in Jumbo Interactive's share price was primarily due to the growing customer base interacting with the Jumbo Lotto platform. From the FY2019 outlook released in mid-February, Jumbo Interactive posted some convincing figures for many investors. From the FY2018 results, Jumbo Interactive is expected to increase its total transaction value by 62% to $296.4 million and its revenue by 53% to $60.8 million. Jumbo Interactive is also optimistic for its FY2019 EBIT figure which is expected to double from the previous year. These expectations were based off Jumbo Interactive's large jackpot activity which remains a primary driver for the growth of total transaction value.
The recent half-year announcement released by Jumbo Interactive was impressive. The financial statements reported a 57.9% increase in revenue to $30.5 million. Profit after tax saw an increase of 138.4% to $12.6 million with EPS doubling from the previous half-year report. The strong balance sheet showed a quick ratio of 3.46 indicating sound liquidity.
The cash flow statement showed organic cash growth from its operations and Jumbo Interactive currently holds a large cash reserve which enables future flexibility. The acquisition of a suitable company or a share buyback are two possible options. Furthermore, its dividend payout ratio sits at 33.71% which should be very sustainable for Jumbo Interactive's current financial position.
Can Jumbo Interactive's share price continue to increase?
Jumbo Interactive invests heavily in its online marketing and technology to grow its customer base. From the financial statements, it becomes evident that its key performance indicators are being met. The company has effectively utilised technology to attract younger users with its mobile platform now accounting for 75% of all user interactions.
Back in 2017 when Tatts bought a 15% stake in Jumbo Interactive, an agreement was also made with Jumbo Interactive to extend the relationship between the companies until 2022. With such an agreement in play for a few more years, I believe there remains room for growth in Jumbo Interactive's share price.
For investors looking for a different sort of growth stock, be sure to check out this ASX company which is set to benefit from a $22 billion boom industry in 2019.
