Canaccord raises price target on 'confident' Ideagen
Analysts at Canaccord Genuity raised their target price for British software firm Ideagen from 160p to 170p on Thursday, citing the group's "confident" growth outlook and an "attractive" valuation as their reasoning.
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Canaccord said Ideagen's capital markets day had highlighted the "attractiveness" of the risk and audit management software market, evidenced by high confidence in continued organic growth of more than 8% per annum with scope for acceleration to low-teens from 2020.
The Canadian broker, which also reiterated its 'buy' rating on Ideagen, expects recurring revenues to surpass 70% in 2019, noting that they could even approach 80% by 2022, increasing the defensiveness of its shares.
And the company's attractive earnings profile should be enriched by tuck-in M&A, where the firm's chief executive Ben Dorks and chairman David Hornsby had "a strong integration track record".
"In the current uncertain macro times, the relative value of a reliable growth compounder such as Ideagen should go up, particularly as we see that most peers exhibiting similar growth and recurring revenue characteristics trade on 25+% higher multiples," said Canaccord.
"We lift our target to 170p reflecting higher conviction in growth delivery, re-rated peers and rolling forward our DCF. Our target implies 20% upside but we highlight ~80% potential assuming management delivers on its '£100m revenues and £30m EBITDA' target for FY22."