Online marketing communications specialist DotDigital (DOTD:AIM) may offer further upside, despite a high rating which was further enriched in the wake of a better-than-expected year-end trading update (15 Jul).

The £96 million cap’s core dotMailer product, which allows in-house marketing professionals to take control of their own email campaigns using an intuitive online interface, is benefiting from a shift in strategy to serve medium rather than small clients. Sales for dotMailer rose 32% in the year to 30 June to £16.1 million, versus a £15.9 million forecast from N+1 Singer.

DOTDIGITAL GROUP - Comparison Line Chart (Rebased to first)

The stockbroker is holding back from updating its numbers for now, but we reckon upgrades will follow at October’s full-year results where 2015 and 2016’s numbers are likely to revised upwards to reflect the momentum at dotMailer. Based on the current 2015 forecast for 1.6p of earnings per share (EPS), the stock trade on a price to earnings ratio of 21.4 times, based on a 34.25p share price.

The cash-generative dividend-paying business, first flagged by Shares 28 November 2013, justifies the rich rating given EPS growth of 45% in the 12 months to June 2015 and £9.3 million net cash.

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Issue Date: 22 Jul 2014