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Actions in Beeks financial cloud (LSE: BKS) are having a great day (February 6). As I write, under-the-radar British stocks are up 32%.
So what's behind this huge share price move? And can stocks continue to rise?
A UK cloud company
Before we talk about the rising share price, let's quickly look at what this company does, since it has a fairly low profile.
Beeks Financial Cloud is essentially a cloud computing/data company focused on the financial services industry. Established in 2011, it specializes in providing on-demand computing, connectivity and analytics services to institutions (e.g. investment managers and trading firms).
Using Beeks' cloud-based infrastructure-as-a-service (IaaS) model, financial institutions can deploy and connect to exchanges, malls, and cloud service providers at a fraction of the cost of building their own technology infrastructure. This means much more flexibility and agility.
Beeks is on the list London Stock Exchange's AIM market and is a very small company. At yesterday's close, its market capitalization was just £71m.
Share price increase
Now, the reason why the stock price has skyrocketed today is that the company has released a very positive update in which there were several interesting news.
Firstly, Beeks said that following the successful deployment of an initial contract with a 'Tier 1' investment manager for its 'Proximity Cloud' solution, a new contract has been awarded for additional locations. This more than doubles the value of the initial contract to $3.6 million in total over a four-year period.
Secondly, the group told investors that it had signed a conditional contract with one of the world's largest exchange groups for its 'Exchange Cloud' offering. This agreement marks the initial phase of an anticipated multi-year partnership between Beeks and the exchange.
Third, the company said that, having won several competitive bids in the first half of fiscal 2024 (ending June 30), it now expects operations in fiscal 2025 to be “significantly ahead”Of the expectations of the previous meeting.
Overall, it was a very successful update. And that's why the stock price has risen so much.
More profits to come?
After reading today's update and looking at Beeks' offer, I think this stock looks very interesting right now.
For fiscal 2025, Canaccord analysts forecast revenue of £39.6m and earnings per share of 8.3p. That would represent growth of 34% and 62% from the current consensus figures for fiscal 2024.
However, the stock's valuation does not appear to reflect this growth. Taking that earnings forecast of 8.3p, the price-to-earnings (P/E) ratio is just 17.
For a data/cloud computing company, that's low. Many companies in this space have P/E ratios of 30 or 40, due to their recurring revenue.
It is worth noting that the price-earnings-growth (PEG) ratio here is just 0.27, which is very low and suggests the stock is undervalued. So I think Beeks will bring more benefits.
That being said, I view this stock as higher risk. History shows that its share price can be volatile. Earnings per share can also fluctuate widely.
I already have a lot of exposure to cloud computing/data through stocks like Amazon, microsoft, Alphabet, Snowflakeand London Stock Exchange Group.
But I'm tempted to take a bite here. I think this stock is going up.