The Nearmap share price is up 70% in 2019: Is it too late to invest?

The Nearmap Ltd (ASX:NEA) share price is up 70% since the start of the year. Is it too late to buy this fast-growing tech company's shares?

| 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

Although the Nearmap Ltd (ASX: NEA) share price is trading around 40% lower than its 52-week high, it has still been a market-beater in 2019.

Since the start of the year the leading aerial imagery technology and location data company's shares have gained a sizeable 70%.

Why is the Nearmap share price up 70% in 2019?

Investors have been buying Nearmap's shares this year following the release of another strong performance in FY 2019 and a very positive start to the new financial year.

In FY 2019 Nearmap continued to experience strong demand for its services in both the ANZ and North American markets. This led to the company reporting record annualised contract value (ACV) of $90.2 million. This represents a 36% increase year on year.

Also getting investors excited was the more than doubling of its Lifetime Value metric to $1.2 billion and an improvement in its churn levels

The strong form continues in FY 2020.

Pleasingly, this strong form has continued in FY 2020, which could be good news for the Nearmap share price.

At its annual general meeting last month, Nearmap revealed that it expects to deliver group ACV in line with analyst consensus estimates.

This is a range of $116 million to $120 million, which represents growth of 28.6% to 33% on FY 2019's $90.2 million.

Management did warn, though, that the second half will be the stronger of the two. This is due to evolving industry dynamics which are creating new opportunities for growth in the second half.

In addition to this, its North American sales and marketing investment is ramping up and the returns are expected to accelerate in the second half.

Is the Nearmap share price in the buy zone?

Based on the current Nearmap share price and a total of ~451 million shares outstanding, Nearmap has a market capitalisation of just under $1.2 billion.

This means its shares are changing hands at around 10x forecast FY 2020 ACV. Whilst this makes it quite expensive, I believe the company is deserving of its premium valuation.

This is due to its very strong long term growth potential thanks to its leadership position in a massive and growing global market.

Overall, I think it could be a great long term investment along with fellow tech shares Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX).

Motley Fool contributor James Mickleboro 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 Altium and Appen Ltd. 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 »