Why the Bravura Solutions share price is rocketing 13% higher today

The Bravura Solutions Ltd (ASX:BVS) share price has been racing higher again on Wednesday. Here's why…

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The Bravura Solutions Ltd (ASX: BVS) share price is on course to make it two days of strong gains in a row.

In morning trade the fintech company's shares are up 13% to $4.92. This means Bravura's shares are up over 26% over the last two trading days.

Why is the Bravura share price racing higher?

Investors have been fighting to get hold of the company's shares following a trading update on Tuesday.

That update reveals that Bravura is on track to achieve its FY 2020 guidance of mid-teen net profit growth. It also added that recent acquisitions are expected to contribute another $3 million in net profit.

In FY 2019 it delivered a net profit of $32.8 million on revenue of $257.7 million. This guidance therefore implies a net profit of around $41 million in FY 2020.

Broker upgrade.

One broker that was pleased with its update was Goldman Sachs. According to a note out of the investment bank, its analysts have upgraded its shares to a buy rating.

The broker has also lifted its price target on Bravura's shares slightly to $5.06.

Goldman explained why it is bullish on the company. It said: "BVS has invested c. A$160mn developing its core Sonata product which is predominantly sold to wealth managers in the UK and to superannuation funds in Australia. Sonata is built on an open source platform, with an increasing % of new functionality funded by individual clients, which can then by rolled out to BVS' other clients. We see Sonata's track record with an established client base and continued product development as key selling points."

The broker also notes that Bravura has an extremely low churn rate, balance sheet flexibility, improving margins, and regulatory tailwinds.

In respect to the latter, Goldman added: "Whilst we expect that most of the opportunities within the UK wealth management platform market have been largely realised, we see further opportunities for BVS in the workplace pensions market, driven by 'auto enrollment' reform. Based on statistics provided by the Office of National Statistics, over 76% of UK employees were members of a workplace pension scheme in 2018, up from 73% in 2017, and vs. 44% in 2012."

Should you invest?

Bravura's share price has now almost reached Goldman Sachs' price target. Which could mean the upside potential is limited in the near term.

However, I believe it has strong long term growth potential. This could make Bravura a great buy and hold option along with fellow fintech shares Afterpay Touch Group Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P).

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO, Bravura Solutions Ltd, and ZIPCOLTD FPO. The Motley Fool Australia has recommended Bravura Solutions Ltd. 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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