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Investing in Sage, ideas, opinions?

Discuss Stock buying Shares, tips and ideas for stock market dealing
simoan
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Re: Investing in Sage, ideas, opinions?

#247311

Postby simoan » August 27th, 2019, 4:48 pm

TheMotorcycleBoy wrote:
I'm umming and ahhing currently. I've tried to re analyse them and based future cash flows and earnings power value, I think they are worth between 580-640. That is, if the transformation to SaaS is successful. I only seen one brokers note since their last TU, which sets a target of 625p.

http://www.stockmarketwire.com/article/ ... e-PLC.html

I think most brokers are downbeat on it too:

https://www.marketscreener.com/THE-SAGE ... consensus/

On the last reported earnings they would be PE=23 and DY=2.6% at 630p. They do have an average dividend growth rate of about 8%. Since I've no exposure to the software sector or accounting or SaaS, perhaps I should see I can buy them at about this kind of price.

Matt

I wouldn't pay too much attention to broker price targets and recommendations. Studies have shown that they are utterly meaningless and following them works out no better than tossing a coin. In fact, my recollection is that they don't even beat the coin!

The change of business model to SaaS is a clear worry and I remember a previous software holding having the same problem in transitioning from up-front license fees to recurring revenues. Let's face it, it's always better to get the full amount of revenue up-front no matter what you're selling! One of my other holdings (Sopheon) is going through the same transition. It's a good company but the change to SaaS has whacked the share price because it really hurts EPS in the short-term. It's the main reason I have less interest in Sage currently.

All the best, Si

TheMotorcycleBoy
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Re: Investing in Sage, ideas, opinions?

#247398

Postby TheMotorcycleBoy » August 28th, 2019, 7:02 am

simoan wrote:
TheMotorcycleBoy wrote:
I'm umming and ahhing currently. I've tried to re analyse them and based future cash flows and earnings power value, I think they are worth between 580-640. That is, if the transformation to SaaS is successful. I only seen one brokers note since their last TU, which sets a target of 625p.

http://www.stockmarketwire.com/article/ ... e-PLC.html

I think most brokers are downbeat on it too:

https://www.marketscreener.com/THE-SAGE ... consensus/

On the last reported earnings they would be PE=23 and DY=2.6% at 630p. They do have an average dividend growth rate of about 8%. Since I've no exposure to the software sector or accounting or SaaS, perhaps I should see I can buy them at about this kind of price.

Matt

I wouldn't pay too much attention to broker price targets and recommendations. Studies have shown that they are utterly meaningless and following them works out no better than tossing a coin. In fact, my recollection is that they don't even beat the coin!

Yes, I quite agree with you re. broker targets and recommendations. I don't use them to price my buys, but like to just do a bit of googling with the string "CompanyX broker notes" or some such, really to see what the current sentiment is, and to see if it helps me acquire more information on the firm.

The change of business model to SaaS is a clear worry and I remember a previous software holding having the same problem in transitioning from up-front license fees to recurring revenues. Let's face it, it's always better to get the full amount of revenue up-front no matter what you're selling! One of my other holdings (Sopheon) is going through the same transition.

I see what you mean.

On the flipside, is there not an argument that states that recurring revenues are more predictable?

(This next bit is a slight aside from the billing mechanism)

On the subject of s/w firms moving to SaaS business models
Presumably the movement from local s/w installations of SageAccounting to Cloud based subscription will be more advantageous to the customer than to the service provider? I'm thinking it makes it easier for customers to switch provider, and hence will drive prices down in the long run.

Matt

monabri
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Re: Investing in Sage, ideas, opinions?

#369610

Postby monabri » December 24th, 2020, 6:15 pm

A year has passed, I wonder if views have changed on Sage? It doesn't seem to be going anywhere fast.

TheMotorcycleBoy
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Re: Investing in Sage, ideas, opinions?

#369619

Postby TheMotorcycleBoy » December 24th, 2020, 7:05 pm

monabri wrote:A year has passed, I wonder if views have changed on Sage? It doesn't seem to be going anywhere fast.

I topped them up after their 14% SP fall.

That came after they announced a forecast -3% hit on OM next year due to investment plans.

They do seem to have a plan, and continue pay divs.

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Re: Investing in Sage, ideas, opinions?

#371131

Postby Heinous » December 30th, 2020, 10:24 am

simoan wrote:I wouldn't pay too much attention to broker price targets and recommendations. Studies have shown that they are utterly meaningless and following them works out no better than tossing a coin. In fact, my recollection is that they don't even beat the coin!

I agree on their value (or lack of); but they aren't meaningless, they're simply wise after the event.
If you had a time machine, broker recommendations would make you a large fortune yesterday. Meanwhile, a 'buy' recommendation, after everyone has already bought and share price is through the roof, is of somewhat limited value.

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Re: Investing in Sage, ideas, opinions?

#371134

Postby Heinous » December 30th, 2020, 10:27 am

Interesting company.
One of those template article websites discussed it in the context of "influential profit drivers of high quality and a relatively cheap valuation", which is fine, but neglected to point out that two equally important measures (among many) are the state of the competition and their 'innovation status'; Sage was an innovative company, now it's a 'safe pair of hands'; it used to dominate its sector, now it has many ambitious competitors. A recent selling-off of overseas subsidiaries is a small red flag in a business sector that is increasingly international.
It's an unexciting prospect. On the other hand, it does pay dividends, and it's much more likely to end its days in a corporate takeover than in going down the plughole (in my view).

johnhemming
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Re: Investing in Sage, ideas, opinions?

#371135

Postby johnhemming » December 30th, 2020, 10:29 am

Heinous wrote:I agree on their value (or lack of); but they aren't meaningless, they're simply wise after the event.

I think there is a value to looking at target price and to consider if you disagree with it in principle why?

One of my key questions is if the price is different to how I value a stock (and I only really need to assess a value if it is at least 25% more than the market price)why? Broker target prices give more information about this.

One of the things about a heavy amount of index trading is that stocks can be sold when there is no good reason simply because people are selling the index.

simoan
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Re: Investing in Sage, ideas, opinions?

#371230

Postby simoan » December 30th, 2020, 1:09 pm

Heinous wrote:
simoan wrote:I wouldn't pay too much attention to broker price targets and recommendations. Studies have shown that they are utterly meaningless and following them works out no better than tossing a coin. In fact, my recollection is that they don't even beat the coin!

I agree on their value (or lack of); but they aren't meaningless, they're simply wise after the event.
If you had a time machine, broker recommendations would make you a large fortune yesterday. Meanwhile, a 'buy' recommendation, after everyone has already bought and share price is through the roof, is of somewhat limited value.

As I mentioned studies have shown that stockmarket professionals are no better at picking the best stocks than you could do yourself by tossing a coin. This is the study from 2004 I was thinking of where they couldn't beat a bunch of psychology students: https://www.researchgate.net/publicatio ... ock_Market

As for broker target prices, they are utterly meaningless unless you know the basis on which they are calculated and over what time frame. Even then, it's a guess isn't it based on so many assumptions about the future? And even worse it is a number to which you will naturally "anchor". Anchoring to share prices is one of the worst traps you can fall into as an investor.

All the best, Si


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