Prime Transaction: Newly listed companies have among the highest increases in BSE revenue

The top of the biggest increases in issuers' revenues from the Bucharest Stock Exchange (BVB) is dominated by entrepreneurial companies listed in the last ten years which, in most cases, have an explicit policy of accelerated expansion, according to a report by the Analysis Department of the Prime Transaction, available in the attached document.

According to the document, which takes into account the evolution of the operating income of companies over the last ten years (or after listing in some cases) for issuers with increases in income in at least 75% of cases, the IT&C solutions integrator Bittnet Systems is in first place with an average annual growth of 47.8% (calculated starting from 2018). It is followed by property developer One United Properties, with average annual revenue growth of 32.7%, and private healthcare provider MedLife, with 22%. The following positions are occupied by the wine producer Purcari Wineries with 20.2% and the operator of public food chains Sphera Franchise Group, whose average annual revenue growth was 17.9%.

"Percentage of growth years is a key indicator to distinguish between truly growth-oriented companies and those for which a favorable context has led to very high revenue growth in the more recent period," say those from Prime, adding that these are average compounded increases, not average annual percentage increases.

According to the document, from an investment perspective, growth stocks are characterized by high market multiples, justified by expectations that the larger size of the business will bring superior value addition to other stocks. The median for the entire analyzed period of the Price to Earnings ratio (which compares the price per share to the profit per share) in the case of Bittnet Systems is 139, according to Prime, in the next places being MedLife with 71 and TeraPlast with 39.3. The median share of the Bucharest Stock Exchange is 24.4, while for Sphera it is 23.9.

The Price to Earnings ratio can be interpreted as the price an investor has to pay for one monetary unit of a company's profit.

According to Prime, the most important growth issuers tend to sacrifice profit margins on the one hand, and shareholder remuneration through dividends on the other, in order to achieve a larger market share in a shorter time.

Bittnet Systems and MedLife have not distributed dividends, while One United Properties has reduced distributions, according to data presented by the brokerage's Research Department in the attached document.