How to find Explosive stocks in Mid-cap zone

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How to find Explosive stocks in Mid-cap zone

 How to find Explosive stocks in Mid-cap zone

Mid-cap stocks are considered to be having higher growth potential than any blue-chip stock and less risky than any penny stock. Although investment in a good mid-cap stock can help investors to increase their wealth substantially over a short period, it isn't very easy to identify mid-caps with growth prospects.

Three things to look in Mid-cap Stocks

Strong historical performance – In order to identify explosive stocks in mid-cap zone, the first thing one must-see is the historic operational and financial performance of stocks. Mid-cap stocks with strong historic performance could be a sign that the stock may do wonders in the future. To properly judge a stock, one must go through the historic operational as well as the financial performance of the stock. It is understandable that not all companies will be having a long history of operations; hence those companies should be judged and evaluated on the forecasted performance.

Strong Outlook - Mid-cap stocks with strong outlook could be a positive indicator for investors. A company with a strong outlook have higher chances of doing good in the future. That’s why for investors outlook of a company is one of the key elements considered while taking an investment decision.

Favourable Market Sentiment- If a market is running in favour of a particular sector, any mid cap stock belonging to that sector will be looked positively. A favourable market sentiment will only supplement the good performance of a mid-cap stock.

To know more about mid-cap stocks, we have screened few mid-cap stocks trading on ASX and have tried to see these stocks from the lenses of above-mentioned factors.

Appen Limited (ASX: APX)

Appen Limited, a global leader in the development of high-quality, human-annotated datasets for machine learning and artificial intelligence, recently increased its 2019 full-year earnings guidance, driven by increases in monthly relevance revenues and margins, largely from existing projects with existing customers.

The company now expects its underlying EBITDA for FY2019 to be in the range of $96 million to $99 million, higher than the previous guidance of $85 million - $90 million.

What is Appen doing right?

  • Appen’s existing customers underpin revenue growth with repeat buying for existing and new projects;
  • Customer relationships remain strong due to high quality data and service;
  • New customer numbers building through Figure Eight and investments in sales and marketing
  • Investing in technology to improve speed, quality and productivity
  • Appen management supporting sales and technology acceleration
  • Investing in resources, facilities and technology to respond to government needs

Strong H1 Results

The company has strong results for the half year ended 30th June 2019. This include:

  • Revenue up 60% to $245.1 million in H1 FY19, as compared to pcp
  • Underlying EBITDA1 of $46.3 million, up 81% on pcp,
  • Statutory EBITDA up 48%
  • Underlying EBITDA margins improved from 16.8% to 18.9%
  • Underlying NPAT of $29.6 million up 67%

In the last one year, APX stock price has increased by 73.28% on ASX. At market close on 3 January 2020, APX stock was trading at a price of $22.520, up by 1.533% intraday, with a market cap of around $2.69 billion. It is to be noted that the stock is trading at a PE multiple of 52.520x (as per ASX) with an annual dividend yield of 0.36%.

Link Administration Holdings Limited (ASX: LNK)

The past year has been a transformative one for Link Group. There have been many positive strategic and operational initiatives undertaken and completed during the year. 40% of the company’s revenues are now coming from outside Australia across 14 jurisdictions. Lately, the company moved to a global operating model and refreshed the Executive Leadership Team with several key external appointments in Human Resources & Brand, Risk & Compliance, Retirement & Super Solutions as well as internal promotions in other executive roles.

For the 12 months ended 30 June 2019, Link Group has delivered:

  • Revenues of $1.4 billion ($1.2 billion excluding CPCS), up 17% on the prior year
  • Operating EBITDA of $356 million ($321 million excluding CPCS), up 6% on the prior year
  • Operating NPATA of $202 million, down 3% on the prior year
  • Statutory Net Profit After Tax of $320 million, up 123% on the prior year

The company’s global transformation program is on track and is expected to deliver $50 million of annual cost savings by the end of FY2022. Following the integration of its functions, the company is now rationalising its global vendors.

FY20 Outlook

  • FY 2020 Operating EBITDA of the continuing business is expected to be stronger in 2H and overall, broadly in-line with FY 2019
  • RSS guidance FY 2020: revenues of $480 million -$500 million and Operating EBITDA of $60 million-$70 million
  • Global transformation to deliver $50 million of annualised savings by end of FY 2022
  • On market share buyback of up to 10%

In the last six months, LNK stock price increased by 10.21%. At market close on 3 January 2020, LNK stock was trading at a price of $5.890 with a market cap of around $3.09 billion. LNK’s stock is trading at a PE multiple of 9.720x with an annual dividend yield of 3.52%.

Altura Mining Limited (ASX: AJM)

Global lithium player, Altura Mining Limited (ASX: AJM) is a well-established lithium producer which has a strong customer base, with a diversified portfolio of committed offtake partners.

AJM Recent Updates

  • The company recently revised its production guidance for Q4 CY19 following changes to maintenance schedules to bring forward a plant shutdown previously planned for February 2020;
  • To refinance its current loan note debt, the company has commenced discussions with potential investors. One of the options for the proposed refinancing is a potential issue of senior secured notes, subject to market and other conditions;
  • During September quarter, the company’s production was impacted by the 94-hour shutdown and by lower than forecast crusher performance, which reduced plant throughputs and required feed of stockpiled crushed ore with higher quality variability.

At market close on 3rd January 2020, AJM stock was trading at a price of $0.058, up by 11.538% during the intraday trade. The stock currently has a market cap of around $128.86 million.


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