Aveva shares leapt tenfold in the last decade, I think the 2020s could be just as good

If you had invested £1k in this company 10 years ago your investment would now be worth £10k. I think the next decade could be even better.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

It’s a rare animal indeed, a British tech firm, a member of that most illustrious of clubs (the FTSE 100), and a company that is turning heads around the world. But I think there are good reasons to believe that despite the meteoric growth seen in recent years, Aveva (LSE:AVV) shares are a long way from peaking. Indeed, I think the 2020s could be just as good for the shares as the 2010s.

Aveva provides engineering and industrial software. Its main area of speciality was oil and mining sectors, but thanks to a merger with French company Schneider Electric, it has become less reliant on these notoriously cyclical sectors.

The company entered the FTSE 100 last year, replacing Marks & Spencer in the index, but it would be difficult to find two companies that are more different. While M&S struggles with the rapidly changing digital retail space, Aveva is helping industry embrace digital.

Its performance has been impressive indeed. Revenue increased from £209m in the year to March 2015 to £767m in the year by the end of March 2019. Profits took a hit last year, but the most recent update revealed a return to profits that are expected to pass a quarter of a billion pounds within two years.

As for the shares, they have increased 78% over the last 12 months, by 280% over the last five years and by roughly 40 times so far this century.

Not surprisingly, with growth like that, its P/E ratio is at quite an altitude — over 200. But its current valuation of £8.1bn based on projected profits of £247m next year does not seem so excessive.

What I like

That’s not why I like the company, however. What I like are the future prospects, and the way new technologies are making the Aveva product offering more compelling than ever before.

The key technology is 5G. This is creating the opportunity for what’s known as the industrial internet of things — using much faster internet speeds to generate a flow of data across industry and in engineering facilities that could be truly transformative.

Not so long ago, there was a sense of fear permeating industry with people wondering how companies could respond to disruptive changes created by digital technology. At a time when digital was tearing up the high street, there was an awareness that industry was also vulnerable. 

The debate has moved on, now companies are  focused on the response — not necessarily making themselves disruptive-technology-proof, but often looking at ways that they themselves can disrupt. Digital technologies are key to making this happen. Advances in AI converging with the industrial internet of things is creating new opportunities as quickly as old models die.  Digital transformation has become vital and Aveva is a key player in this very area.

That’s why I think that its growth potential is almost as impressive today as it was 10 or even 20 years ago. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Michael Baxter 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.

More on Investing Articles

Investing Articles

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »