One 'secret' growth stock I'd buy alongside Motif Bio plc

Up graph with bar charts
Up graph with bar charts

I can't fault the share price of Oxford Metrics(LSE: OMG) over the past two years. Since the end of 2014 the stock is up over 200%. During that period revenue has risen, but earnings have wavered after shooting up 395% in 2015.

The firm provides analytics software for motion measurement and infrastructure asset management to clients in more than 70 countries. Customers include highway authorities managing and maintaining road networks, hospitals and clinicians, plus Hollywood studios who use the software to create visual effects.

A five-year plan for growth

Today's full-year results continue the trend in the finances. Revenue from continuing operations at constant currency rates rose 7.6% compared to a year ago and adjusted profit before tax dropped almost 24%. The directors reckon earnings are down because of planned investment in the Yotta division, which provides cloud-based infrastructure asset management software to central and local government agencies and other infrastructure owners.

Judging by the muted share price reaction this morning, I think investors are happy to back the firm's five-year growth plan. I think we should expect such investment at this stage, one year into the plan. Ongoing top-line growth suggests the potential for enhanced profits down the road, and chief executive Nick Bolton seems pleased with this year's outcome saying "annualised Recurring Revenues, a key metric for our five-year plan, has improved 22%."

Oxford Metrics is reshaping its business for better growth, and I'm encouraged by the directors' decision to raise the dividend by 20% this year in support of the firm's progressive dividend policy. The outlook is positive, and I think the full ongoing growth potential of this company looks set to emerge over the next few years. It could prove timely to research the investment opportunity right now.

Finance in place

Meanwhile, Motif Bio(LSE: MTFB), the clinical-stage biopharmaceutical company, has seen its share price ease around 19% since I last looked at the firm on 4 October. Back then the share price shot up on the news of a positive top-line result from a global Phase 3 clinical trial called REVIVE-2. This focused on the firm's investigational drug candidate iclaprim for patients with Acute Bacterial Skin and Skin Structure Infections (ABSSSI). That successful trial clears the way for the firm to submit a new drug application to the US Food and Drug Administration (FDA) in first quarter of 2018.

Maybe Motif Bio is on the cusp of commercialising what could go on to be a big-earning drug. In the meantime, the firm lacks meaningful income, and I said in October that its finances looked precarious. But news arrived during November that the company has agreed a US $20m debt financing arrangement with Hercules Capital, Inc. a firm specialising in customised debt financing for companies in life sciences and technology-related markets.

Motif Bio plans to use the funds to finance pre-commercialisation and other activities leading to the anticipated US launch of iclaprim during 2019. I reckon this is an encouraging development because it removes immediate worries over money and shows that Hercules sees potential for iclaprim. To me, the case for an investment in Motif Bio has improved and the fact that the share price is lower is a bonus.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.