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Celebrus (LSE:CLBS) is one of the UK shares I’ve been adding to my portfolio since the start of the year. And the stock surged 15% today (8 July) after the company released its full-year results.
The business is performing well, with strong growth across the board. Despite this, the stock is still down 40% since the start of the year, so should I keep buying?
Growth
Celebrus is a software firm with a product that allows businesses to track activity on their websites and apps in real time. Unlike competitors, it does this without relying on cookies.
Despite being a UK business, the company reports its revenues and profits in US dollars. And both sales and profits were up significantly from the previous year.
The key metric with this type of business is Annual Recurring Revenue (ARR), and this grew 13.9% to $18.8m. Earnings per share (EPS) increased by just over 36% to 18.24c.
Separately, the company announced two new contracts – one with a European bank and another with a US fintech firm. These are set to boost ARR by $1.1m in the first year and more in the future.
Analysis
Earlier this year, Celebrus had offered cautious earnings guidance. Management cited the risk of an uncertain geopolitical environment causing businesses to be wary with their spending.
Given this, I think the latest results are very positive. And the company continues to demonstrate its broad appeal, with new customers including a global airline and a major fintech.
One thing I’m mindful of, however, is the fact the reporting period only finishes at the end of March – so before the recent tariff uncertainty. That’s an ongoing risk, especially at the moment.
Overall, I see the results as a resilient performance during what should have been an unusually challenging year. Given this, I think the current valuation still looks attractive.
Valuation
At today’s exchange rates, the full-year results mean Celebrus shares are trading at an (adjusted) price-to-earnings (P/E) ratio of just under 13. That’s after the latest move in the share price.
That’s quite low compared to other tech stocks, but the company also has around a third of its market value in net cash on its balance sheet. Adjusting for this, the stock looks even cheaper.
I don’t think this accurately reflects the company’s growth prospects. Celebrus has orders in place that should boost ARR to almost $20m – a 10% increase on the most recent results.
I’m expecting higher sales to lead to higher margins, which should result in faster growth in EPS. On this basis, a P/E ratio of less than 13 looks like a bargain to me.
Buying?
I still think Celebrus has some impressive prospects and the current share price looks like a bargain to me. On that basis, it’s staying on my list of stocks to consider buying.
The share price moving higher means the stock now accounts for quite a bit of my portfolio. So only for reasons to do with diversification, I need to think carefully about what to do.
