IQE plc and this high-flying stock could help you become an ISA millionaire

Today's full-year results from data-focused marketing solutions provider Taptica International (LSE: TAP) topped off a year during which the shares rose more than 100%.

The firm describes 2017 as "transformational" after new international offices and acquisitions drove "significant" revenue growth. The directors think that international expansion during the year created a solid foundation for building further growth in its performance and brand advertising businesses.

Organic and acquisitive growth

The figures speak for themselves. Revenue came in 68% higher than 2016, net cash from operations elevated 52% and adjusted diluted earnings per share lifted 31%. In a sign of confidence in the outlook, the directors pushed up the final dividend for the year by 25%.

Chief executive Hagai Tal said most of the growth came from new offices in the Asia-Pacific region, "where consumers continue to increase their use of apps and accessing the internet on their mobiles."  During the year, Taptica bought Japan's Adinnovation and America's Tremor Video DSP to achieve wider coverage in the Asia Pacific region and in the US, which Mr Tal reckons are "the two standout regions for growth in digital ad spending." Tremor also diversified the firm's revenue into the growth area of brand advertising.

Taptica enjoys "sustained demand" supported by consumers embracing the use of apps, which is a strong trend. The outlook is positive, and the firm plans to build a business that is "truly global in scale."  Meanwhile, City analysts expect earnings to grow 2% during 2018 and 12% in 2019, suggesting workmanlike progress ahead. But the current valuation looks reasonable. Today's share price around 360p throws up a forward price-to-earnings (P/E) rating just below 11 for 2019 and a forward dividend yield around 1.5%.

Forward earnings rising

That's a keener valuation than we are seeing with tech superstar IQE (LSE: IQE). Investors holding the advanced wafer supplier's shares have enjoyed a rise of more than 230% since January 2017, although there's been volatility in the price over the last few months. That's not surprising because there's a lot at stake given the high earnings multiple -- today's share price around 130p put the historical P/E rating at just over 36.

However, valuations are about looking forward and in this month's full-year report the firm said that its record financial results reflect the mass-market adoption of its VCSEL technology while a broadening IP portfolio "sets the Group for continuing diversification and growth." City analysts' predictions are starting to look perkier. They expect earnings in 2019 to increase by as much as 39%, which brings the forward P/E rating down to a less-demanding 23 or so.

If IQE can sustain its high double-digit rate of earnings growth going forward, we could even see a valuation re-rating driving the shares up from here. Chief executive Dr Drew Nelson said wafer revenues rose 21% during 2017, pushing adjusted operating profit from wafer sales up 58%. He puts that outcome down to high operational gearing working alongside a more profitable sales mix. I think there is strong potential for higher profits down the line with IQE and that both these stocks would sit well in a longer-term diversified ISA portfolio aimed at growing capital towards a million.

Capital Gains

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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.

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