As the Nearmap share price trades near all time highs, one fund manager expects FY19 to be a watershed year for this high flying tech stock

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After initially falling after returning from trade following its $70 million capital raise, the Nearmap (ASX:NEA) share price has jumped higher gain, now trading at $1.865, close to its all time high.

Nearmap shares have trebled over the past 12 months, making it one of the best performing stocks in the All Ordinaries Index over that period. Effective September 24, 2018 Nearmap will be added to the ASX 300 Index.

Writing in its September update, top performing fund manager Pie Funds said it initiated a position in Nearmap in January this year. The Nearmap share price has soared 206 per cent higher so far in 2018.

Click here to get the latest NEA chart and share price

Pie Funds says Nearmap is a software as a Service (SaaS) company which provides aerial imagery and analytics from regular captures of major Australian and US cities.

The funds goes on to say growth in portfolio lifetime value (PLV) is a critical metric for SaaS companies as it indicates the long-term value created for shareholders and the underlying health of the business.

On that front, according to Pie Funds, Nearmap delivered a strong set of results for the year ended June 30, 2018 with its PLV increasing 84 per cent to $715 million. This was driven by growth in subscribers, growth in average revenue per subscriber, and declining churn.

In FY18 Nearmap showed it could replicate its highly successful Australian business in the massive US market, demonstrating improving unit economics with accelerating revenue growth, high sales efficiency and lower churn.

Pie Funds says it expects FY19 to be a watershed year, as Nearmap moves through cashflow break even and the significant operating leverage in the business becomes apparent.

Astronomical valuation

Late late week Nearmap completed a strongly oversubscribed $70 million capital raising at an issue price of $1.60.

The funds raised will be used to expand the group sales and marketing capability, to expand Nearmap product and technology capabilities and to further fund international expansion.

Nearmap shares definitely aren’t cheap. An article in the AFR said Nearmap is currently forecast to make a profit in 2020 which would give Nearmap shares a price to earnings multiple of 171, an “astronomical” valuation.

Nearmap shares don’t look cheap, but these 3 shares do…

Combining countless hours of research with over 30 years of hands-on stock market investing experience, The Capital Club’s founder Bruce Jackson has just published his definitive list of 3 Cheap and Good ASX Stocks for 2018.

Nearmap was not one of them, but the list does include one tiny gold mining stock, and the company one top fund manager calls the cheapest stock in the ASX 100.

Find out why these 3 Cheap and Good Stocks could be better buys than Nearmap. But you better hurry… these stocks may not stay cheap for long.

See the 3 stocks

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Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at brucej@thecapitalclub.com.au