LoopUp Group (LSE AIM: LOOP) is a global software-as-a-service (SaaS) provider of remote meetings. It enables businesses and professionals to collaborate in real time. The companies clients include the likes of Travelex, Kia Motors America, Planet Hollywood and National Geographic.
What LoopUp offers
According to LoopUp, an average conference call runs about 38 minutes, 15 minutes of which is wasted either getting started or because of distractions. This ends up costing US and UK companies over £26 billion- up 46% since 2015. Additionally, the company added that Dial-in remains the primary way business professionals participate in conference calls, making them risk-averse in terms of their comfort levels with software.
LoopUp’s user experience is designed to be hassle-free, with the company claiming that participants are able to join remote meetings easily without training and is designed to integrate easily with common tools like Outlook. Other product features include one-click screen sharing, call-start alerts to let hosts know when guests join etc. Given that its features don’t overwhelm its users the company claims new users only use dial-in access for 25% of their calls, and rely on LoopUp’s user experience 75% of the time.
LoopUp’s Financials
Despite competing in a crowded space including large conference providers (AT&T, BlueJeans, WebEx, Citrix, Skype for Business etc), the company’s numbers have been impressive. It reported a 96% year-over-year growth in revenue for the year ended 31 December 2018 to £34.2m (FY2017: £17.5m).
Revenues were boosted by the June 2018 acquisition of rival MeetingZone. Adjusted EBITDA increased by 121% to £7.7m (FY2017: £3.5m). However, profit fell on an annual basis, as a result of amortisation costs of £1.3m and exceptional reorganisation costs of £1.2m. Annual profit for the year was £1.24m versus £1.98m in the prior year.
Is LOOP worth a shot?
LOOP is trading at a high price-to-earnings (PE) ratio of 99.1x, meaning that the company is overvalued based on current earnings compared to the industry average of 24.7x. In terms of price, LOOP share price has declined by 9.3% year-over-year.
In comparison, the UK tech sector has risen 5.4% in the same period, while the broader UK market has risen by 2.08%. On a year-to-date basis, LOOP has risen by 26.72% while the UK tech sector and the broader UK market have risen 24.7% and 6% respectively.
Given its performance and the industry it belongs to, LOOP can certainly be classified as a high-growth stock. This is reflected in its price, and its higher PE ratio compared to peers. That being said, its strong financial performance may be the reason for high relative valuation. LOOP could be a good way to diversify your tech portfolio.
However, if you have limited exposure to the tech sector, the high PE may signal that its the right time to sell. If you are a potential investor, now may not be the best time to buy the stock given as it is trading at a higher valuation compared to other tech companies.
Disclosure:
I have no positions in any of the securities referenced in the contribution
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This contribution is for informational purpose and does not constitute investment advice nor is it an offer to sell or buy, nor is it a recommendation for any security.
Kshitija B.
