'Marmite' stock Ocado (OCDO) ripens 21.3p or 8.7% to 265.70p. Full year results from the online supermarket show a better-than-expected 21.8% rise in pre-tax profit to £14.5m on retail sales growth of 13.6% to the best part of £1.27bn.

ROBUST SHOWING

The market welcomes evidence of robust trading in a tough groceries market in which Tesco (TSCO), Morrisons (MRW) and Sainsbury's (SBRY) are battling back against discounters Aldi and Lidl and Amazon's entry will change the game.

However Ocado's retail margins did decline amid continued pressure from price deflation; average basket value declined by 2.7% to £108.10 from £111.15 in 2015.

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CEO Tim Steiner assures 'we anticipate continuing to grow ahead of the online market in the year ahead', although the real share price catalyst today is his growing confidence in signing 'multiple deals in multiple territories in the medium term' to licence out Ocado's advanced technology platform.

Ocado has long promised a deal or deals with third party retailers for the Ocado Smart Platform, though there hasn't been much in the way of tangible progress, yet.

ANALYSTS VIEW

Numis Securities, a buyer with a 400p price target, writes: 'There is no specific news regarding any international deal, although management notes that it has ‘advanced discussions with multiple potential international partners to utilise Ocado Smart Platform’ and ‘expects to sign multiple deals in multiple territories in the medium term’. We see the appointment of Luke Jensen as CEO - Ocado Smart Platform (formerly Sainsbury’s Group Development Director), as an important strengthening, a sign of Ocado's intent, and an endorsement of the strategy.'

Neil Wilson, Senior Market Analyst at ETX Capital, is far less enthused: 'After more than a year of talk we’ve seen nothing in terms of an overseas deal. But that doesn’t seem to be affecting investors’ appetite for the stock this morning', he explains.

'However, concerns about the group remain if a deal is not forthcoming. Profits are improving but investors are being asked to be very patient. A long-touted international deal has yet to materialise. That is a concern as overseas growth is seen as key for this stock to justify its lofty valuation. Even if it’s down around two-thirds from the all-time highs hit in 2014, the stock was still trading at around 115 times earnings before today’s announcement. Profits of £14.5m on £1.271bn in revenues look pretty puny.'

Ocado - JAN 17Even more scathing are comments from Shore Capital, which writes: 'Oh to have the licence to make suggestions about big strategic initiatives, like signing up with international partners, and then not delivering on a serial basis. Such is the story from online supermarket Ocado, which continues to hold discussions with multiple international retailers about the adoption of the Ocado Smart Platform solution, although quite what is being discussed Lord only knows, online deliveries to the moon no doubt.'

Highlighting muted 3.3% progression in earnings before interest, taxation, depreciation and amortisation (EBITDA) to £83.4m last year, the broker adds: 'Cutting through the techno-babble, to quote the baddy Elliott Carver from 007’s ‘Tomorrow Never Dies', Ocado does a lot to deliver a little for investors, if we judge earnings and dividends to be a relevant output of a business’ reason for being.'

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Issue Date: 31 Jan 2017