Telematics black box designer Quartix (QTX:AIM) is riding the crest of a demand wave as insurance companies increasingly roll out the kit to drivers in order to monitor how a vehicle is driven and where it is parked in order to have more tailored motor insurance policies.

Unfortunately it is becoming difficult to make a case for the shares as so much faultless progress is already priced into its valuation, despite impressive business execution since joining the stock market in November 2014.

House broker FinnCap forecasts £6.7 million pre-tax profit in the year to 31 December 2016 on £22.6 million of revenue. Pre-tax profit is expected to rise by 10.4% to £7.4 million in 2017.

This does not look overly ambitious based on half year results announced 27 July that showed a 26% year-on-year jump in revenue, to £11.6 million, on which £3.4 million of pre-tax profit was earned. This implies more than half of the full year’s revenue and profit is already in the bag.

Cash conversion is also very strong, seeing £3.6 million generated by operations which converts to £3 million in free cash flow. Insurance revenue jumped 47% during the half to £4.4 million, about 38% of the total and illustrating the importance of the industry to the small cap.

Quartix floated on AIM on 116p per share and at the time was largely a supplier of telematics kit to fleet customers. This situation has rapidly changed. The company uses the same core kit for both fleet and insurance clients but changes the business model to reflect the end usage patterns.

Fleet customers tend to use the company’s services for years at a time, whereas the insurance market is built around rolling 12-month policies.

The company is successfully leveraging this multi-use capability, mainly in the UK but also in a smaller way in France. It has also taken its first tentative steps into the US, potentially huge on both fleet and insurance sides. US revenues remain small at £400,000 in the January to June period, but growing fast, up from just £100,000 a year ago.

There is precious little for investors to complain about on the execution side. And that has created a bigger fan base that has chased the shares on a 223% rally in little more than a year and a half. That puts the stock on a price to earnings (PE) multiple of 28.8-times next year’s 13p EPS estimate, leaving them prone to the slightest disappointment. With the shares now trading at FinnCap’s own 375p price target, only the most risk-resilient investors should continue to chase the stock.