In the last 12 months the Nextdc Ltd (ASX: NXT) share price has been one of the best performers on the local share market.
During this time the data centre operator's shares have rallied a massive 35%.
Can its shares still go higher?
I think they can. Demand for data centre services is growing at such a strong rate, the company recently reported a 32% increase in contracted utilisation to 30MW and a 42% increase in interconnection.
This led to half-year earnings before interest, tax, depreciation, and amortisation rising a whopping 110% to $23.9 million.
The driver of this demand has of course been the shift to the cloud. These days everything from accounting software from the likes of XERO FPO NZX (ASX: XRO) and Myob Group Ltd (ASX: MYO), to Microsoft Office is run in the cloud.
Unsurprisingly this resulted in cloud adoption by Australian companies rising 86% in 2016 according to a recent presentation. I expect this trend to continue for some time to come, positioning NEXTDC to profit greatly.
Especially with the investments the company has made in its facilities. The company aims to meet this increasing demand with the opening of three more data centres. Two of which are scheduled to open in the second-half.
This will leave the company with a total of eight data centres with the potential to offer 104.1MW of capacity. This is more than triple the current contracted utilisation and provides significant room to grow.
Should you invest?
Although its shares are admittedly on the expensive side, I believe that its current growth profile warrants the premium.
In light of this, I feel NEXTDC would be a fantastic buy and hold investment.
