Why the Nearmap share price is up 60% so far in 2019

Nearmap Ltd (ASX: NEA) has started 2019 with a bang, as the share price has risen by a stunning 60% to close Friday's trading at $2.39

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Nearmap Ltd (ASX: NEA) has started 2019 with a bang, as the share price has risen by a stunning 60% to close Friday's trading at $2.39.  Let's take a closer look at why it has started the year in this bullish fashion.

Nearmap Limited is an ASX listed aerial imagery technology and location data company that provides frequently-updated, high-resolution aerial imagery of Australia, United States of America and New Zealand.

The Nearmap share price has really benefitted from positive preliminary results released in mid-January, which indicated that several important metrics were performing strongly.

The main growth metric is the annualised contract value (ACV) which reflects the revenue provided by paying customers on a full year basis.  This is up 42% year-on-year to $78.3M and has been largely driven by a 107% increase in the US component of the ACV, along with a very healthy 23% growth in the Australian component.

Similar to Afterpay Touch Group Ltd (ASX: APT), Nearmap's management has identified the massive opportunity that the US represents, and even small market penetration could result in sizeable earnings.  After the release of the preliminary report, the US ACV accounts for one-third of the total value.

The other main reason behind the Nearmap share price surge is due to the company reaffirming FY2019 guidance.  This includes: deploying $70M in capital raised to accelerate sales and marketing strategy in USA and expansion into Canada, looking to break even on cash flows and continue to strive for technological leadership in the field.

The company is yet to turn a profit but has done exceptionally well to continue growing the top line.  Looking at key ratios, it's current Price to Sales ratio is sitting at an expensive 18, compared to the sector's 1.4 while it's Price to book value is also sitting very high at 33.

Foolish Takeaway

There is no doubting that Nearmap Limited has the potential to continue churning out impressive growth numbers and should turn a profit in coming financial years.

At the current Nearmap share price, it's market capitalisation sits at ~$1B so it's still a very much a small cap.  It is possible that capital raisings may be required to help provide further expansion down the track.

Looking at the P/S ratio and P/B ratio, it is clear to see that investor optimism regarding the US expansion is already built in the current Nearmap share price.  Whilst it looks like it could be a star of the future, it may be worthwhile leaving it on the watchlist for now as it's already up 60% this calendar year.

Motley Fool contributor Michael Guinery has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Nearmap Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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.

More on Share Gainers

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Share Gainers

Why Fortescue, Lynas, PEXA, and Regis Healthcare shares are charging higher

These shares are having a strong session on Thursday. But why?

Read more »

A young man talks tech on his phone while looking at a laptop. A financial graph is superimposed across the image.
Share Gainers

Why Capricorn Metals, Insignia, Perseus Mining, and Qoria shares are storming higher

These shares are having a strong session on Tuesday. But why?

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Share Gainers

Why Amaero, AMP, Block, and South32 shares are racing higher today

These shares are starting the week on a positive note. But why?

Read more »

Ten happy friends leaping in the air outdoors.
Share Gainers

Here are the top 10 ASX 200 shares today

It was another momentous session for ASX shares this Friday.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Share Gainers

Why BHP, Catalyst Metals, Mesoblast, and Pilbara Minerals shares are shooting higher

These shares are ending the week with a bang. But why?

Read more »

Doctor doing a telemedicine using laptop at a medical clinic
Healthcare Shares

The Mesoblast share price just rocketed 38%! Here's why

ASX investors just sent the Mesoblast share price up 38%. But why?

Read more »

A businessman stacks building blocks.
Share Gainers

Here are the top 10 ASX 200 shares today

ASX shares hit a new record high today.

Read more »

A man sees some good news on his phone and gives a little cheer.
Share Gainers

Why Auckland Airport, Australian Ethical, Breville, and Clarity shares are charging higher

These shares are having a better day than most on Thursday. But why?

Read more »