The growth of Instem is hard to miss
12 Apr 2016 • About Instem (
$INS) • By InTwits
Instem is a fast-growing stock in Software & Computer Services industry. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.
Growth story
Instem showed fast growth in the last financial year. The company's revenue surged on 21.5% in FY2015. Together with revenue growth Instem also managed to keep EBITDA growth. EBITDA grew 43.2% for the same period.
In the last 3 years Instem showed fast revenue growth of 15.3% from 2012 to 2015 annually. EBITDA surged on 16.7% from 2012 to 2015 annually.
Instem ($INS) financials for the last 5 years
| mln. £ | 2011 | 2012 | 2013 | 2014 | 2015 |
|---|
| Revenue | 11 | 11 | 11 | 13 | 16 |
|---|
| Revenue growth, % | | -1.2% | 6.6% | 18.2% | 21.5% |
|---|
| SG&A, % | | | | | |
|---|
| EBITDA | 2 | 2 | 1 | 2 | 3 |
|---|
| EBITDA growth, % | | -19.4% | -6.3% | 18.5% | 43.2% |
|---|
| EBITDA margin, % | 18.1% | 14.8% | 13.0% | 13.0% | 15.3% |
|---|
| Net Income | 1 | 1 | 1 | 0 | -0 |
|---|
| Net Income margin, % | 9.32% | 9.79% | 4.66% | 1.12% | -2.62% |
|---|
| |
| CAPEX | 0 | 0 | 0 | 0 | 0 |
|---|
| CAPEX/Revenue, % | 1.41% | 1.48% | 1.51% | 0.923% | 0.692% |
|---|
| Debt | 0 | 0 | 1 | 2 | 0 |
|---|
| Cash | 3 | 2 | 2 | 2 | 2 |
|---|
| Net Debt/EBITDA | -1.6x | -1.4x | -0.5x | 0.1x | -0.7x |
|---|
| |
| ROIC, % | 30.3% | 20.6% | 14.7% | 10.9% | 20.4% |
|---|
| ROE, % | 20.2% | 20.1% | 10.6% | 2.9% | -7.1% |
|---|
Profitability and return on investment
EBITDA growth was supported by margin expansion. EBITDA margin surged on 2.30 pp from 13% to 15.3% in 2015. If we look for the longer period EBITDA margin increased slightly on 0.500 pp from 14.8% in 2012 to 15.3% in 2015.
We call Instem an attractive growth stock as together with the growth it delivers high ROIC at 20.4%. During the last three years it decreased slightly - it was 20.6% in FY2012. It's average level of ROIC for the last three years was 15.3%.
The company showed big decline in Net Income margin of 3.70 pp from 1.10% to -2.60% in 2015. In the longer period the company showed big decline in Net Income margin of 12.4 pp from 9.80% in 2012 to -2.60% in 2015.
Instem operates at ROE of -7.11%. Average ROE for the last three years was 2.13%.
Capital expenditures (CAPEX)
The company's CAPEX/Revenue was 0.692% in FY2015. The company showed big decline in CAPEX/Revenue of 0.790 pp from 1.48% in 2012 to 0.692% in 2015. For the last three years the average CAPEX/Revenue was 1.04%.
Leverage (Debt)
Instem has negative net debt at -0.7x Net Debt/EBITDA - at the same time with high growth. In the longer period the company's leverage surged on 0.68x from -1.40x in 2012 to -0.72x in 2015.
Valuation vs. comparable companies
The company trades at 13.3x EV/EBITDA which is 4.49% lower than 13.9x Software & Computer Services industry avearge calculated based on 126 companies.
Peers in Software & Computer Services
Below we provide Instem benchmarking against other companies in Software & Computer Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Coms ($COMS) | | -68.6% | 46.8% | 763.3% | 110.4% |
| Proactis Hldgs ($PHD) | | 20.4% | 7.0% | 26.2% | 69.6% |
| Progility ($PGY) | | 4.6% | | | 51.0% |
| Sopheon ($SPE) | | 23.2% | 5.3% | -16.6% | 23.0% |
| Zoo Digital Group ($ZOO) | | -18.7% | -7.4% | -7.7% | 19.9% |
| |
|---|
| Median (30 companies) | 34.2% | 7.2% | 5.7% | 0.3% | 1.8% |
|---|
| Instem ($INS) | | -1.2% | 6.6% | 18.2% | 21.5% |
Top companies by Gross margin, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Lombard Risk Management ($LRM) | 99.3% | 99.0% | 98.8% | 99.2% | 98.6% |
| Phoenix It Group ($PNX) | 97.1% | 97.0% | 97.2% | 97.6% | 97.9% |
| Netcall ($NET) | 86.9% | 88.2% | 89.7% | 91.0% | 90.9% |
| Eleco ($ELCO) | 70.3% | 86.8% | 86.6% | 87.8% | |
| Sanderson Group ($SND) | 82.3% | 83.6% | 87.6% | 84.9% | 84.5% |
| |
|---|
| Median (33 companies) | 59.2% | 60.0% | 62.0% | 58.0% | 60.3% |
|---|
Top companies by EBITDA margin, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Eservglobal ($ESG) | 112.6% | -32.2% | -2.6% | 100.2% | -92.5% |
| Mail.Ru Group Ltd ($61HE) | 39.9% | 43.1% | 47.4% | 50.5% | |
| Lombard Risk Management ($LRM) | 6.2% | 23.9% | 30.8% | 29.3% | 20.5% |
| Rapidcloud Intl ($RCI) | 47.4% | 46.0% | 52.3% | 28.5% | |
| Netcall ($NET) | 19.3% | 21.7% | 23.2% | 25.5% | 23.5% |
| |
|---|
| Median (39 companies) | 13.5% | 13.1% | 11.0% | 9.7% | 6.5% |
|---|
| Instem ($INS) | 18.1% | 14.8% | 13.0% | 13.0% | 15.3% |
Top companies by CAPEX/Revenue, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Rapidcloud Intl ($RCI) | 0.7% | 1.0% | 23.1% | 11.6% | |
| Anite ($AIE) | 3.0% | 4.0% | 3.9% | 5.8% | 3.6% |
| Statpro Group ($SOG) | 3.1% | 2.0% | 2.9% | 5.8% | 2.9% |
| Clearstar Inc ($9537) | 1.4% | 0.7% | 0.6% | 4.5% | 0.6% |
| Wandisco ($WAND) | 0.2% | 2.3% | 4.0% | 4.2% | 0.9% |
| |
|---|
| Median (39 companies) | 1.4% | 1.5% | 1.6% | 1.9% | 1.4% |
|---|
| Instem ($INS) | 1.4% | 1.5% | 1.5% | 0.9% | 0.7% |
Top companies by ROIC, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Eservglobal ($ESG) | 50.0% | -24.8% | -13.0% | 67.9% | -44.5% |
| Lombard Risk Management ($LRM) | 37.7% | 51.4% | 39.2% | 30.2% | 12.2% |
| Progility ($PGY) | 12.7% | 10.3% | 0.0% | 29.2% | -0.1% |
| Kalibrate Technologies ($KLBT) | | 12.5% | 40.2% | 29.2% | 18.8% |
| International Bus Mach Corp ($IBM) | 36.2% | 36.1% | 31.0% | 28.1% | 25.7% |
| |
|---|
| Median (39 companies) | 12.2% | 10.3% | 9.9% | 8.3% | 6.2% |
|---|
| Instem ($INS) | 30.3% | 20.6% | 14.7% | 10.9% | 20.4% |
Top companies by Net Debt / EBITDA
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Parity Group ($PTY) | 6.9x | 4.7x | | 4.9x | 5.1x |
| Escher Group Hldgs ($ESCH) | 2.1x | 0.3x | 0.4x | 2.4x | 0.6x |
| Ubisense Group ($UBI) | -4.2x | -2.2x | -0.4x | 1.8x | |
| Progility ($PGY) | 1.0x | 2.0x | | 1.8x | 12.8x |
| International Bus Mach Corp ($IBM) | 0.8x | 0.9x | 1.2x | 1.4x | 1.7x |
| |
|---|
| Median (30 companies) | -0.7x | -0.4x | -0.4x | -0.4x | -0.4x |
|---|
| Instem ($INS) | -1.6x | -1.4x | -0.5x | 0.1x | -0.7x |
