D4t4 Solutions plc rises 20% on earnings beat. Can this growth stock keep going?

Investor demand for D4t4 Solutions(LSE: D4TF) has sprung to life in Wednesday trading following a blowout trading update for the last fiscal year.

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The stock was last dealing 19% higher on the day and springing away from recent five-month troughs. And I reckon the data management star has much, much further to run.

Sales struggle...

D4t4 advised that it expects profits (excluding the impact of recent currency tailwinds) during the 12 months to March 2017 "to be ahead of current market expectations," even though sales are expected to fall short of forecasts.

The tech play expects revenues for fiscal 2017 to clock in at £17.7m for fiscal 2017, dropping below broker forecasts of £21m.

D4t4 put this down to a fall in sales at its Projects division, the top line here disappointing as a result of "the impact of delays to the commencement of certain projects, particularly in the US due in part to the nervousness and uncertainty leading up to and post the US presidential election."

However, it noted that customer confidence is now returning with President Trump now firmly bedded in at the Oval Office, and that "delayed decisions by both existing and new clients are starting to move forward."

... but margins march on

But it was news of exceptional demand for D4t4's Celebrus data software that has really caused investors to pile in during midweek trade.

The business noted that sales of the product exploded 48% last year, and that Celebrus now accounts for 28% of group turnover versus 18% a year ago.

Explosive demand for its high-margin software has proved the critical driver behind D4t4's earnings beat last year, and vindicates the company's move towards the fast-growing sphere of data gathering, analysis and management.

Confident outlook

It therefore comes as little surprise that D4t4 remains optimistic about its future earnings potential.

Chief executive Peter Kear said: "The business enters the new financial year in robust shape and we are encouraged by the opportunities and outlook for the business in the coming year," adding that "consequently... we are also confident in delivering our expectations for the financial year ending March 2018."

D4t4 commented that it has witnessed "no material impact" on business following Britain's decision to exit the European Union last June.

And while the firm advised this situation could change as negotiations continue, it noted that "as an international business working with UK and multinational companies we believe in our strategy and the board remains confident the business and its people have the flexibility and foresight to meet any challenges as and when they arise."

City forecasts currently suggest that earnings growth is set to slow sharply in the year to March 2018, to 1% from an anticipated 20% rise in fiscal 2017.

However, I believe D4t4's improving focus on the white-hot data segment makes it a terrific growth bet for long-term investors. And I reckon a forward P/E ratio of 15.5 times is fair given the impressive momentum of its Celebrus software.

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