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Stock of the day: TechnologyOne
TechnologyOne's first half shows a 31% profit boost and soaring recurring revenue, driven by SaaS expansion and UK growth, positioning it for continued success despite high valuations.
(AI video summary)
This video was created on 20 May 2025 for IG audiences by ausbiz.
ASX code: TNE
TechnologyOne's strong first-half performance
TechnologyOne, a leading Australian software company, has announced impressive first-half (H1) results. In response, the share price climbed 12%.
- Net profit after tax (NPAT): 31 % increase to $63 million
- Recurring revenue: rose approximately 90% to $265 million
- Fully franked interim dividend of 4.29 cents, up from 3.3 cents previously.
Serving universities, councils, health and financial institutions, TechnologyOne's Software as a Service (SaaS) offering is driving growth. The company increased research and development investments by 21% in H1.
Growth projections and valuation considerations
TechnologyOne has upgraded its guidance, forecasting full-year profit growth of 12% - 16%, following 33% growth in H1. The company targets $1 billion in recurring revenue.
This strong outlook has forced analysts to revise their models upward. Currently, the stock trades at approximately 73 times earnings with a 1% dividend yield.
UK expansion showing promise
TechnologyOne's United Kingdom (UK) business is emerging as a substantial growth driver. The company has established a presence in this market characterised by outdated technology systems. Following a strategic acquisition, TechnologyOne has accelerated its competitive advantage against larger competitors.
The UK market represents a significant opportunity for further expansion, as the company continues to win new contracts.
Investment outlook
Analysts classify TechnologyOne as a 'bottom-drawer' stock for long-term holding. Despite appearing expensive, the company consistently outperforms expectations.
Historical patterns suggest significant pullbacks represent buying opportunities. Previously, the stock was heavily sold after growing 'only' 7% in earnings per share (EPS), which proved to be excellent entry points.
With strong growth across government, education, and UK sectors, TechnologyOne appears well-positioned for continued success.
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