The Appen Ltd (ASX: APX) share price hit a record high of $24.74 this morning and is now up around 33% since releasing its better-than-expected profit report for the six-month period ending December 31 2018.
For the period the data-led artificial intelligence and language services business grew its adjusted profit 148% to $49 million on the back of 119% growth in revenue to $364.3 million.
The company now has a market value around $2.62 billion which might sound a lot, but it is actually "relatively" modestly priced on conventional valuation multiples such as price to sales ratios, when compared to other tech market darlings such as WiseTech Global Ltd (ASX: WTC) or Altium Limited (ASX: ALU).
I bought some Appen shares on the day it reported confident that the stock had room to run higher from a valuation around 16% beneath today's and would not be surprised to see the stock climb a little more out to May 2019 when we may see a trading update at the firm's AGM.
Another stock to hit a record high today that I also bought last month is the a2 Milk Company Ltd (ASX: A2m), I also think it has room to run higher and is likely to beat the market's returns over say a 1 to 3 year period from here.
However, investors should remember all of the above 'high growth' businesses are vulnerable to huge share price falls on the back of a single operational misstep.
Therefore they should only ever make up a small part (<10% in any single stock) of a balanced portfolio in my opinion. However it's fair to say I still rate Appen and the a2 Milk Company as businesses to buy today.
