Cerillion (CER:AIM) £18.90

Gain to date: 19.8%

Genuine growth stocks may be hard to come by on the UK market but Cerillion (CER:AIM) is a rare gem which qualifies. Forecast-beating full year results had analysts gushing, with Canaccord Genuity talking up the stock’s chances of more than doubling. The broker observing ‘more market share gains likely; we see a path to £38 on four to five-year view’.

As we explained in our original Great Idea back in June 2024, Cerillion built its reputation on an integrated enterprise billings and customer relationship management software platform sold to medium-sized telecommunication firms, but has expanded the suite over the years to cover charging, interconnect, mediation, and provisioning solutions.

WHAT HAS HAPPENED SINCE WE SAID BUY?

Full-year results to 30 September 2024, announced on 18 November, impressed again, with record order intake of £38.1 million versus £31.6 million the previous year, potential new customer sales hitting £262 million (£243 million in 2023), also a record, and sales conversion rates that indicate the level of replenishment activity is strong.

This all stands out, yet importantly, growth is anchored in its ability to secure larger telco clients, which deliver higher long-term income thanks to their activity levels and greater software licence and margin contribution. Two large deals were struck last year worth $11.1 million with a South African operator, and a €12.4 million contract with a European operator, which has now been revealed as Virgin Media.

WHAT SHOULD INVESTORS DO NOW?

Cerillion continues to deliver upside to consensus, mid-teens double-digit organic growth and 40%-plus operating margins. Free cash flow last year was £9.7 million, plenty enough to keep the growth compounder machine going.

The shares don’t look cheap on a one-year view – Stockopedia data has them on a 12-month rolling PE (price to earnings) multiple of 35 – but high-quality stocks seldom do. With previous talk of upside risk to forecasts having been proved and scope for consensus to creep higher as the new fiscal year progresses, we believe Cerillion is a buy and keep stock for years to come. 

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