Q: Results looked good. Down 30% on this name. Is this a weed that needs to be pulled? Less than 1% of my portfolio. Thanks!
5i Research Answer:
EPS of $0.059 beat estimates of $0.04 and sales of $31.39M beat estimates of $30.85M. Organic growth was 2%, and its total sales grew nicely (52%), but gross profit margins slipped a bit from 81% to 79%, and ARR only grew 3%. Acquisitions have been driving its sales growth, and so while its topline growth is good, margins are still fairly thin, and the broader markets are not favouring software names with results that are showing growth that was mostly already priced in. Its valuation is now at 25X forward earnings, and we think that for now momentum has been lost and we would consider it a HOLD until it finds support and the market finds a valuation equilibrium for the name.