Stock of the day: TechnologyOne
TechnologyOne achieves a 15% profit increase, driven by strong UK sales and Software as a Service growth. With their ambitious revenue goals, the company presents a compelling case for long-term investors.
(AI video summary)
This video was created on 19 November for IG audiences by ausbiz.
ASX code: TNE
TechnologyOne's impressive financial performance
TechnologyOne, a leading software company, recently reported a profit after tax of $118 million for the financial year 2024, marking a 15% increase from the previous year. This growth has been driven by stronger UK sales and its Software as a Service (SaaS) business. Additionally, TechnologyOne declared a full-year dividend of nearly 22.5 cents per share, a 16% rise compared to the prior year.
The company aims to double in size every five years, targeting over $1 billion in annual recurring revenue by the financial year 2030. Consequently, the stock surged by more than 12% in a single day.
Valuation and growth potential
Despite positive financial results, analysts face challenges in assessing TechnologyOne's valuation. The company's price-to-earnings (P/E) ratio is 56 times, significantly higher than other stocks that might trade at three times.
However, investing in high valuation stocks like TechnologyOne can be rewarding if the company consistently delivers better-than-expected results. While the stock appears expensive compared to its historical valuation and analysts' price targets, it still holds potential for outperformance.
Long-term investment strategy
For long-term investors, TechnologyOne presents a compelling opportunity. Despite its high valuation, the company's consistent earnings growth and robust business model make it an attractive 'bottom drawer' stock. This term refers to stocks that investors can hold onto without actively trading, benefiting from long-term growth.
As earnings double, share prices often follow, making TechnologyOne a promising investment for those willing to ride out market volatility. While it may not be a 'screaming buy' due to its current valuation, it remains a strong hold for investors focused on long-term gains.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Explore the markets with our free course
Discover the range of markets you can trade CFDs on - and learn how they work - with IG Academy's online course.
Turn knowledge into success
Practice makes perfect. Take what you’ve learned in this shares strategy article, and try it out in your demo account.
Ready to trade shares?
Put the lessons in this article to use in a live account. Upgrading is quick and simple.
- Trade over 13,000 popular global stocks
- Protect your capital with risk management tools
- Deal on 70 key US stocks out-of-hours, so you can react to news
Inspired to trade?
Put the knowledge you’ve gained from this article into practice. Log in to your account now.
Live prices on most popular markets
- Forex
- Shares
- Indices
