Cerillion Plc (CER.L) is a leading provider of mission critical software for billing, charging and CRM, with an 18 year track record in providing comprehensive revenue and customer management solutions. The Company has 81 customer installations across 43 countries, principally serving the telecommunications market, but also utilities and financial services. The Company is headquartered in London and has operations in Pune, India, Sydney, Australia and Miami, USA. Cerillion’s CEO, Louis Hall, led the management buyout from Logica plc in 1999.
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On November 27th 2017, CER published a ‘strong set’ of FY results to September 30th 2017. EBITDA grew by 17.8% to £3.6m, on revenues up 8.3% to £16m. EPS grew to 6.9p from 1.3p previously, with recurring revenues up by 9.6% to £4.4m and a back order book up 40.8% to £13.1m. The proposed final dividend of 2.8p per share, brings the total dividend for the year to 4.2p per share, up 7.7%. CEO Louis Hall said he was “very positive about prospects for Cerillion’s continuing progress, underpinned by a strong pipeline of prospects across EMEA, Asia Pacific and Americas.”
The improvement in earnings growth at CER triggered a flag on this metric in late May 2017, and while this was at the time accompanied by a slide in the share price from 138p to 116p, the GRT (Earnings Growth Rate) metric rose steadily over the period to stand at 36% currently. VectorVest consider this to be an excellent rating – GRT reflects a company’s 1-3 year forecasted earnings growth rate in % per year. Although the RS (Relative Safety) risk rating stands at just 0.84 for CER on a scale of 0.00 to 2.00, the RV (Relative Value) rating, an indicator of long-term price appreciation potential stands at 1.51 – again excellent on a scale of 0.00 to 2.00. Accompanied by a very good rating for RT (Relative Timing), a smart, accurate indicator of a stock’s price trend, VectorVest values CER at 177p per share, against the current 130p.
The chart of CER is shown above in my normal format. Earnings per share (EPS) rose strongly in the middle of 2017 and VectorVest revalued the company upwards. During October the started to move upwards on rising volume and then fell a small amount of very low volume. This is a sign of accumulation of the share. On the 27th November, with the news flow, the share broke strongly upwards on very high volume which bullish sign.
Summary: VectorVest subscribers picking up CER stock on the back of the GRT flag during the summer lows will not only be delighted with the subsequent performance, but will now feel fully justified in continuing to hold the stock after yesterday’s bullish set of results and outlook from the CEO. Strong capital growth, coupled with a steadily appreciating dividend payout puts CER firmly into the compelling investment case category. Buy.
Dr David Paul
November 29 2017
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