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Investing in Sage, ideas, opinions?

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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


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