Will you fall in love with Cupid's growth story?

For those of you who like growth companies, here's an interesting story. Cupid is essentially a global on-line dating company achieving rapid growth through acquisition. The company, which joined AIM in June 2010,  released it's half-year results today and exceeded market expectations. Revenues were up by 189% at £25.4m with 53% of the total achieved outside the UK.  EBITDA increased to £5.7m, a rise of 137% and they have £8.4m cash on the balance sheet and no debt.

Cupid are building a truly global presence, and establishing a strong foothold in the North American market.

Monthly revenues now exceed £4.5m per month, which projecting forward should produce a figure in excess of £52.4m for the full year. EPS at the interim stage was around 4p, and broker's forecast's come in at about 9p for the full year. However, I could easily see them achieving 10p+ for 2011 giving a forward p/e of around 24.

The Chief Exec's statement is very bullish:- "We are in a very strong position and remain confident that we will grow value for shareholders in 2011 and beyond. The market for our services is global and growing and we are well placed to take advantage of the numerous opportunities that exist".

It's a truly impressive growth story so far, and I will be keeping a careful eye on the SP and future developments. However, I shan't be buying at the current share price. 

At heart I 'm a value seeker, and my issue with growth companies is that forward p/e ratios of 20+ don't leave any room for mistakes. Essentially growth has to continue at the heady pace expected by the company and the market. Cupid currently has a market cap. of £200m which is about ten times its net asset value (including intangibles). Without a dividend and/or sufficient asset backing then any hint of slowing growth can have a catastrophic effect on the SP. I'm not that brave.

That said, if I was to have a punt on a growth company in the expectation that they could continue to produce impressive figures, then Cupid would certainly be of interest. The very nature of their business appears ripe for consolidation and rapid growth, and I can see the story running for many years to come.

In conclusion, and perverse though it may sound, whilst I can't justify buying Cupid's shares using my strict (largely value based) criteria , a gut feeling tells me that I might be missing out on the next ASOS like growth story here?

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