Could 1Spatial Plc's share price finally match its potential in 2019?

The share price of geospatial data provider 1Spatial (LON:SPA) might well have shown uninspired performance during 2019 so far, but the company has a lot going for it in terms of financial performance and its outlook.

Improving financial performance

For the year ending January 31, 2019, its revenues grew by 4.1% to £17.6m and gross profit grew by 3.4% to £9.2m. It does continue to make operating losses, but the extent of loss has declined significantly over the years from £6.3m in 2018 to £1.6m now.

One analyst report (Edison Investments) actually expects the company to clock an operating profit from the next financial year onwards. The fact that the company has no debt on its books is a significant positive since the start of 2018.

Big contracts in the UK and Ireland

At present, the UK is the biggest market for 1Spatial's products and services, followed by the rest of Europe with a share of 41% and 36% respectively. The current year has also started on a positive note for the company, with a £1m contract signed with the UK's No.1 Aeronautical Information Documents Unit and a £900k contract with Ireland's Property Registration Authority.

This gives it greater visibility on revenue going forward, as does the change in company strategy to move away from selling licenses at one time to recurring format. As a result, while in the short-term the revenue generation might appear to slow down, it does allow for greater dependability in the long-term.

Growing the European market, traction in the US

The European market is also poised to grow going forward, with the acquisition of France based Geomap-Imagis Participations, which is expected to consolidate its position in France and Belgium. The company has also signed an agreement with California based Esri, which has a market-leading geographic information system GIS, that 1Spatial's European customers can now have access to.

The US forms a relatively smaller market for the company, accounting for 11% of the revenues but some traction is visible here too. For FY20, it has signed contracts with Kansas State Department and Kansas Department of Transport worth 0.2m and extended a contract with Google for £0.3m.

Conclusion: The fact that GIS industry is a growing one, is a positive for the company. According to PS Market Research, it is expected to reach the size of $17.5bn by 2023, growing at a CAGR of 10% up till then. The outlook is promising for the location master data management (LMDM) sector as well, where 1Spatial hopes to acquire a leading position in the long-term.

According to Transparency Market Research, the market is expected to reach a size of $21bn by 2024, a CAGR of 27% starting from 2017. All things considered, 1Spatial is worthy of investor interest and those hunting for opportunities in the segment should consider it to be a promising buy.