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Sage is "ticking all the boxes", says Bank of America

By Benjamin Chiou

Date: Thursday 23 Nov 2023

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(Sharecast News) - Bank of America has lifted its target price for business software group Sage, saying the company is "ticking all the boxes" with its solid top-line growth, margin expansion and a new share buyback.
Sage impressed the market on Wednesday with its results for the year to September 2023, in which revenues grew 10%, with recurring revenues increasing 11%, and a 140 basis-point increase in operating profit margins to 20.9%.

The company also guided to similar revenue growth in current financial year, ahead of consensus estimates of 9.3%, and announced a new £350m buyback equivalent to 3.5% of its market cap.

Bank of America said the results showed "no sign of macro pressure as demand remains unabated".

"We see Q4 as another strong data point supporting our positive thesis on Sage," the bank said, citing impressive recurring revenue growth, a supporting pricing environment, and a strong recovery in margins after they dropped over the past four years.

Bank of America also highlighted the stock's valuation, with the EV/EBITDA multiple at just 19.6x, which remains at a 40% discount to its US-listed peer Intuit at 32.7x.

The bank has raised its target price for the shares from 1,150p to 1,300p and reiterated its 'buy' recommendation.

Th stock was up 0.6% at 1,137p by 1440 GMT, after a near-14% jump on Wednesday.


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