The Kin and Carta (LSE: KCT) share price has ballooned during the past 12 months. And thanks to another strong rise today, the tech giant has soared by almost 300% year-on-year.
Kin and Carta’s share price is currently up 23% from last night’s close at 243p per share. The IT firm struck its highest for more than five years above 245p earlier in the session. And it’s within a whisker of touching levels not visited since late 2007.
Upgrading expectations
UK share investors are piling into Kin and Carta after the tech giant upgraded its expectations for the year. It said it’s “executing on a strong resumption of growth with accelerating demand for digital transformation” as the impact of Covid-19 begins to retreat.
The company — which provides consultancy services to help businesses digitalise their operations — now expects to report net revenue growth of around 10% to £150m in the full year to July. Kin and Carta recorded net revenues of £137.8m in the prior financial year.
Underlying profit before tax, meanwhile, is estimated at around £14.5m in fiscal 2021. This would represent growth of between 35% and 40% from the £10.5m profit the IT giant recorded a year earlier.
Looking further ahead
It also went on to paint a sunny picture beyond the current financial period. Based on current performance and order backlogs, it expects net revenue growth to accelerate to 20% in financial 2022. It expects its underlying operating margin to increase to between 12% and 13% too.
Kin and Carta added that in the medium term, organic net revenues should rise at a compound annual growth rate of around 15%. And operating margins should keep expanding as it continues to scale up its operations.
Why I’d buy Kin and Carta today
It clearly has the bit between its teeth right now. It’s why City analysts think the IT expert will follow an 18% earnings increase in financial 2021 with a 40% jump next year. I’m minded to think that next year’s forecasts will be steadily upgraded too.
Companies were already rapidly digitalising their businesses before the Covid-19 crisis hit. Since then evidence is emerging to show that the pandemic has sped up the digital transformation process across the globe. A recent McKinsey survey revealed that “companies have accelerated the digitisation of their customer and supply-chain interactions and of their internal operations by three to four years”. Naturally Kin and Carta is ideally placed to exploit this phenomenon.
But it’s important to remember that it operates in a competitive industry and so success is not guaranteed. Profits projections might also take a whack if the economic recovery stutters and business confidence suffers. Still, at current prices I’m seriously thinking about adding the company to my shares portfolio. It trades on a price-to-earnings growth (PEG) ratio of just 0.8 for financial 2022. A reading below 1 suggests a share might be undervalued.
