Gresham Computing Net Income jumped on 45.9% in 2017 and EBITDA Margin increased slightly on 2.0 pp from 20.6% to 22.6%
13 Mar 2018 • About Gresham Computing (
$GHT) • By InTwits
Gresham Computing reported 2017 financial results today. Overall looking at the company's long term financial model we can say that:
- Gresham Computing is a fast growth stock: 2017 revenue growth was 26.3%, 5 year revenue CAGR was 16.0% at 2017 ROIC 13.6%
- EBITDA Margin is expanding: 22.6% in 2017 vs. 20.6% in 2016 vs. 19.3% in 2013
- Gresham Computing has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.3%. At the same time it's in pair with industry average of 2.2%.
- CAPEX is quite volatile: 0.28 in 2017, 0.51 in 2016, 0.22 in 2015, 0.24 in 2014, 0.56 in 2013
- The company has highly profitable business model: ROIC is at 13.6%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Gresham Computing ($GHT) key annual financial indicators
| mln. £ | 2013 | 2014 | 2015 | 2016 | 2017 | 2017/2016 |
|---|
P&L
|
|---|
| Revenue | 14.048 | 12.832 | 14.842 | 17.156 | 21.668 | 26.3% |
| Gross Profit | 10.286 | 9.423 | 12.020 | 14.172 | 18.385 | 29.7% |
| SG&A | | 8.991 | 10.459 | 11.988 | 15.341 | 28.0% |
| EBITDA | 2.708 | 1.124 | 2.686 | 3.539 | 4.899 | 38.4% |
| Net Income | 2.100 | 1.095 | 1.950 | 2.605 | 3.801 | 45.9% |
Balance Sheet
|
|---|
| Cash | 4.386 | 4.707 | 4.666 | 7.206 | 8.480 | 17.7% |
| Short Term Debt | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |
| Long Term Debt | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |
Cash flow
|
|---|
| Capex | 0.557 | 0.244 | 0.217 | 0.508 | 0.280 | -44.9% |
Ratios
|
|---|
| Revenue growth | 36.0% | -8.7% | 15.7% | 15.6% | 26.3% | |
| EBITDA growth | 38.4% | -58.5% | 139.0% | 31.8% | 38.4% | |
| Gross Margin | 73.2% | 73.4% | 81.0% | 82.6% | 84.8% | 2.2% |
| EBITDA Margin | 19.3% | 8.8% | 18.1% | 20.6% | 22.6% | 2.0% |
| Net Income Margin | 14.9% | 8.5% | 13.1% | 15.2% | 17.5% | 2.4% |
| SG&A, % of revenue | | 70.1% | 70.5% | 69.9% | 70.8% | 0.9% |
| CAPEX, % of revenue | 4.0% | 1.9% | 1.5% | 3.0% | 1.3% | -1.7% |
| ROIC | 23.6% | 3.8% | 12.6% | 12.3% | 13.6% | 1.2% |
| ROE | 24.4% | 9.1% | 14.0% | 14.4% | 16.3% | 1.9% |
| Net Debt/EBITDA | -1.6x | -4.2x | -1.7x | -2.0x | -1.7x | 0.3x |
Revenue and profitability
The company's Revenue surged on 26.3% in 2017. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased slightly on 2.0 pp from 20.6% to 22.6% in 2017.
Gross Margin increased on 2.2 pp from 82.6% to 84.8% in 2017. SG&A as a % of Revenue increased slightly on 0.92 pp from 69.9% to 70.8% in 2017.
Net Income marign increased on 2.4 pp from 15.2% to 17.5% in 2017.
Capital expenditures (CAPEX) and working capital investments
In 2017 the company had CAPEX/Revenue of 1.3%. The company showed small CAPEX/Revenue decline of 0.61 pp from 1.9% in 2014 to 1.3% in 2017. For the last three years the average CAPEX/Revenue was 1.9%.
Return on investment
The company operates at good ROIC (13.56%) and ROE (16.29%). ROIC increased slightly on 1.2 pp from 12.3% to 13.6% in 2017. ROE increased slightly on 1.9 pp from 14.4% to 16.3% in 2017.
Leverage (Debt)
The company has no debt. Cash surged on 17.7% in 2017.
Valuation
The company's trades at EV/EBITDA 26.6x and P/E 36.5x.
Appendix 1: Peers in Software & Computer Services
Below you can find Gresham Computing benchmarking vs. other companies in Software & Computer Services industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Pennant International Group ($PEN) | 29.1% | -4.7% | -44.4% | 74.0% | |
| Sopheon ($SPE) | 5.3% | -16.6% | 23.0% | 69.7% | |
| Coms ($COMS) | 46.8% | 763.3% | 110.4% | 36.1% | |
| Microgen ($MCGN) | -7.7% | -0.0% | 7.2% | 34.5% | |
| IMImobile ($IMO) | | 12.7% | 12.6% | 26.1% | 23.5% |
| |
|---|
| Median (34 companies) | 5.7% | 4.7% | 3.1% | 10.5% | 17.3% |
|---|
| Gresham Computing ($GHT) | | -8.7% | 15.7% | 15.6% | 26.3% |
Top companies by Gross margin, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Lombard Risk Management ($LRM) | 98.8% | 99.2% | 98.6% | 99.3% | |
| Netcall ($NET) | 89.7% | 91.0% | 90.9% | 91.2% | 91.7% |
| Wandisco ($WAND) | 80.3% | 80.7% | 93.2% | 88.1% | |
| Dotdigital Group ($DOTD) | 92.7% | 90.5% | 89.3% | 87.4% | 86.1% |
| Idox ($IDOX) | 90.8% | 89.4% | 89.3% | 86.8% | 83.0% |
| |
|---|
| Median (24 companies) | 62.0% | 57.8% | 58.8% | 56.6% | 84.5% |
|---|
| Gresham Computing ($GHT) | 73.2% | 73.4% | 81.0% | 82.6% | 84.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Mail.Ru Group Ltd ($61HE) | 47.4% | 50.5% | 34.6% | 35.2% | |
| Dotdigital Group ($DOTD) | 39.4% | 29.2% | 32.0% | 30.4% | 31.7% |
| Idox ($IDOX) | 26.1% | 26.0% | 28.6% | 27.3% | 16.6% |
| Proactis Holdings ($PHD) | 18.3% | 22.8% | 26.4% | 23.7% | 3.7% |
| Oxford Metrics ($OMG) | 6.0% | 14.7% | 28.4% | 23.1% | 19.9% |
| |
|---|
| Median (27 companies) | 12.8% | 13.0% | 12.3% | 11.0% | 17.6% |
|---|
| Gresham Computing ($GHT) | 19.3% | 8.8% | 18.1% | 20.6% | 22.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Mail.Ru Group Ltd ($61HE) | 5.8% | 3.0% | 3.6% | 5.2% | |
| Csf Group ($CSFG) | 4.0% | 2.4% | 7.1% | 4.9% | |
| International Bus Mach Corp ($IBM) | 3.7% | 4.0% | 4.4% | 4.5% | |
| IMImobile ($IMO) | 3.3% | 3.9% | 2.0% | 3.3% | 2.8% |
| Unisys Corp ($USY) | 2.5% | 4.1% | 5.0% | 3.0% | |
| |
|---|
| Median (27 companies) | 1.5% | 1.9% | 1.0% | 1.2% | 1.5% |
|---|
| Gresham Computing ($GHT) | 4.0% | 1.9% | 1.5% | 3.0% | 1.3% |
Top companies by ROIC, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Rm ($RM.) | 48.6% | 130.8% | 289.2% | 263.8% | |
| Triad Group ($TRD) | -3.8% | 24.5% | 61.5% | 74.4% | |
| Dotdigital Group ($DOTD) | 38.0% | 28.5% | 31.4% | 28.9% | 29.3% |
| International Bus Mach Corp ($IBM) | 31.0% | 28.1% | 25.7% | 18.7% | |
| Oxford Metrics ($OMG) | -0.1% | 0.8% | 14.6% | 16.3% | 12.7% |
| |
|---|
| Median (34 companies) | 11.6% | 9.8% | 5.3% | 8.4% | 9.0% |
|---|
| Gresham Computing ($GHT) | 23.6% | 3.8% | 12.6% | 12.3% | 13.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Zoo Digital Group ($ZOO) | 3.2x | | | 38.3x | |
| Progility ($PGY) | | 1.8x | 12.8x | 6.8x | |
| International Bus Mach Corp ($IBM) | 1.2x | 1.4x | 1.7x | 2.2x | |
| Idox ($IDOX) | 1.3x | 1.0x | 1.3x | 1.2x | 2.2x |
| Datatec ($DTC) | -0.3x | 0.3x | 0.4x | 1.1x | |
| |
|---|
| Median (24 companies) | -0.4x | -0.3x | -0.5x | -0.8x | -1.6x |
|---|
| Gresham Computing ($GHT) | -1.6x | -4.2x | -1.7x | -2.0x | -1.7x |
