Patent translation provider RWS (RWS:AIM) surges 19% on a six paragraph trading update today – although the latest news does look pretty good.
A spike in US patent filings helped revenue gain 10% year-on-year in the six months to 30 September 2015.
Performance has also been boosted by growth in its patent database service PatBase as well as a return to growth in acquired web-based patent filing operation inovia.
Full year performance is now likely to be ahead of the £22.1 million profit-before-tax and 7.7p earnings per share forecast by broker Numis after interim results in June.
But investors should be braced for a difficult year ahead. Euro currency hedges used by RWS have helped maintain profitability this year despite a weakening of the Eurozone currency.
Other things being equal, RWS will start the new financial year with a roughly £1 million profit headwind as a result, according to Numis analyst Will Wallis.
‘We continue to model a gradual return to underlying constant currency revenue growth, while expecting EPS to fall in 2016 as the impact of the lower euro is no longer offset by currency hedging gains,’ wrote Wallis after interim results.
‘We continue to believe in the long-term opportunities for the group, given its excellent market position, growth track record and cash generation.’
Numis still has a ‘hold’ rating on the stock and a 145p price target. Forecasts will be updated after full year results are published on 8 December, Wallis says.
Earlier this year, the stock traded at its widest sector price-to-earnings in the last 10 years (see chart).