When I tipped Sportingbet in July last year, at 98.25p, the company was capitalised at a little over £200 million. After a couple of acquisitions, including the all-important one of Paradise Poker in the States, and a tripling of the share price to 313p, the company is now valued in the market at £1.08 billion. But onto that one has to add the shares that can be issued against the convertible loan note. That takes Sportingbet’s fully diluted market value to £1.35 billion. Is it worth that?

  The six-month figures last week showed near-30 per cent growth in the top line, a 44 per cent expansion in margins and a near-doubled profit (before goodwill amortisation and exceptionals) of £26 million. Add in a full contribution from Paradise Poker, which only contributed three months’ profits to the half-year figures, and this is a business that could easily make £80 million in the coming 12 months. Given the rate at which profits are growing, it deserves a decent multiple.

  But fully diluted earnings (pre-goodwill amortisation and exceptionals) came through at just 6.7p in the six months to end-January. Double up, allow for some more growth, add in a full contribution from Paradise Poker and the underlying run rate over the coming 12 months gets to somewhere over 20p a share. On a 20 times multiple that would make the shares worth somewhere between 400p and 450p.

  But that assumes the online poker business is going to continue to grow at the manic rates seen in the last year to 18 months. It is bound to slow down at some point. Sports and gaming bets have also been growing fast (up 49 per cent in the past year) but the margins have been declining. Verdict? The balance of probabilities suggests another pound of upside, but this is one to keep a close eye on. For now, continue to hold.