Looking for a growth stock? Pay attention to Lombard Risk Management

20 May 2014 • About Lombard Risk Management ($LRM) • By InTwits

Lombard Risk Management is an attractive growth stock in Software & Computer Services industry. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.

Growth story

Lombard Risk Management showed fast growth in the last financial year. Lombard Risk Management's revenue surged on 21.6% in FY2014. EBITDA also increased considerably: 15.4% for the same period.

If we look for the longer period the company showed fast revenue growth of 20.0% from FY2011 to FY2014 annually. EBITDA surged on 101% from FY2011 to FY2014 annually.

Lombard Risk Management ($LRM) financials for the last 5 years

mln. £	FY2010	FY2011	FY2012	FY2013	FY2014
Revenue	9	12	13	17	20
Revenue growth, %		31.9%	8.1%	31.4%	21.6%
Gross margin, %	98.1%	99.3%	99.0%	98.8%	99.2%
SG&A, %
EBITDA	-1	1	3	5	6
EBITDA growth, %		-156.8%	313.3%	69.9%	15.4%
EBITDA margin, %	-14.5%	6.24%	23.9%	30.8%	29.3%
Net Income	-2	1	3	4	5
Net Income margin, %	-17.7%	10.8%	19.6%	22.4%	25.5%

CAPEX	0	0	0	0	0
CAPEX/Revenue, %	0.993%	0.644%	1.53%	1.25%	1.94%
Debt	0	0	2	2	1
Cash	1	2	0	2	3
Net Debt/EBITDA	0.5x	-2.4x	0.6x	-0.0x	-0.4x

ROIC, %	-176.4%	37.7%	51.4%	39.2%	30.2%
ROE, %	-193.2%	65.2%	62.8%	47.0%	36.1%

Profitability and return on investment

Despite revenue growth EBITDA margin declined slightly from 30.8% in FY2013 to 29.3% in FY2014. In the longer period Lombard Risk Management showed fast EBITDA margin growth of 23.1 pp from 6.20% in FY2011 to 29.3% in FY2014.

We call Lombard Risk Management an attractive growth stock as together with the growth it delivers high ROIC at 30.2%. During the last three years it dropped - it was 37.7% in FY2011. For the last three years the average ROIC was 40.3%.

Net Income margin surged on 3.10 pp from 22.4% to 25.5% in FY2014. If we look for the longer period the company showed fast Net Income margin growth of 14.7 pp from 10.8% in FY2011 to 25.5% in FY2014.

Lombard Risk Management operates at ROE of 36.1%. It's average ROE for the last three years was 48.6%.

Capital expenditures (CAPEX)

In FY2014 the company had CAPEX/Revenue of 1.94%. CAPEX/Revenue surged on 1.29 pp from 0.644% in FY2011 to 1.94% in FY2014. It's average level of CAPEX/Revenue for the last three years was 1.57%.

Leverage (Debt)

Lombard Risk Management has negative net debt at -0.4x Net Debt/EBITDA - at the same time with high growth. If we look for the longer period the company's leverage surged on 2.04x from -2.42x in FY2011 to -0.38x in FY2014.

Lombard Risk Management stock price chart

Lombard Risk Management financials

mln.	FY2010	FY2011	FY2012

Revenue	8.949	11.801	12.758
EBITDA	-1.298	0.737	3.045
Net income	-1.584	1.273	2.505
CAPEX	0.089	0.076	0.195
Debt	0.000	0.000	2.000
Cash	0.702	1.782	0.128

About Lombard Risk Management

Lombard Risk Management plc provides trading, valuation, and risk management systems; regulatory and transaction reporting systems; and compliance systems to the financial markets worldwide. The company operates in two segments, Regulatory Compliance Software, and Risk Management and Trading Software. Its products include COLLINE that provides collateral management, clearing, and inventory management and optimization solutions; REPORTER, a regulatory compliance solution for branch or head office with global coverage; REG-Reporter, a solution, which addresses the financial reporting requirements of banks and financial institutions; LISA, a scenario analysis and stress testing solution; and REFORM, a solution for pre-/post-trade lifecycle management and reporting. The company also offers ReporterMIS solution, which delivers visibility into various aspects of business; and OBERON, an integrated multi-currency system for the trading and risk management of interest rate derivatives and inflation derivatives, foreign exchange, money market, and fixed income portfolios. In addition, it provides FIRMAMENT, which is an integrated suite of trading and risk management applications that covers the life-cycle of tradable instrument types; and ComplianceASSESSOR, a Web-based compliance and audit application, which provides a means of assessing, evidencing, and recording compliance against an unlimited library of regulations. Further, the company offers implementation, deployment, consulting, support, and training services. It serves banks, fund administrators, investment firms, asset managers, energy companies, hedge funds, large corporations, and other firms operating in financial markets and the wider financial industry. The company has a strategic alliance with Broadridge Financial Solutions, Inc. to address changing industry needs in the collateral management sector. Lombard Risk Management plc was founded in 1989 and is headquartered in London, the United Kingdom.