We have had a trading & business update today from one of the stocks in the Compound Income Scores Portfolio (CISP) - namely Taptica (TAP) the £290m market cap. mobile advertising firm. It says that they expect to report EBITDA ahead of market expectations with Tremor Video DSP achieving profitability ahead of schedule. It is this last point that seems to be the main driver behind the expected beat as since its acquisition in August it has been integrated quicker and is now expected to report a profit in 2017 rather than in 2018 as had been expected.
In addition to this Taptica also continued to expand its Tier 1 client base as well as increase its business with its existing household-name clients. The growth was driven by the significant contribution to revenues from the Company's newly established international offices, primarily in the Asia-Pacific region, and, in particular, by the strong performance of Adinnovation in Japan, in which Taptica acquired a majority stake in 2017. They did say however that they expected revenues to be in line but did expect a higher EBITDA margin which also helps to explain the beat and probably helped by the early swing into profit from Tremor mentioned above.
Before any upgrades today on the back of this announcement the shares were still on a reasonable looking rating of around 14x for 2018 forecast eps, although they did say they are still confident of delivering solid year-on-year EBITDA growth for 2018 in line with market expectations which suggests these numbers may not be upgraded at this stage, although the current year 2017 forecasts obviously will be.
Thus despite the strong share price gains in the last two years it still looks reasonable value given the on going rapid growth in their market and the international and product expansion they have been undertaking. This probably reflect the volatility in profits that they have shown in the past and their Israeli base. They do however seem to be building a decent track record now and like XL Media seem to be enjoying something of a re-rating along with the growth. I guess this could go further, given the growth, if the market chooses to place a bit more trust in it, and in terms of momentum it is looking good as it is trading around all time highs and looks like breaking out again. It still looks good on the Compound Income Scores too.