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Iress Ltd flags more strong revenue and profit growth in 2017

Financial technology business Iress Ltd (ASX: IRE) held its annual general meeting today with its chairman and chief executive providing an update as to the operating performance of the business.

The group reports on a calendar year basis and in 2016 it delivered operating revenue up 13% on a currency-adjusted basis, with segment profit up 7% on a currency-adjusted basis.

It also paid total dividends of 37 cents per share on earnings per share of 44 cents, which places it on a payout ratio of around 84%.

Over the past couple of years the business has also been on a shopping spree in buying three junior fintech businesses in Proquote, Pulse and Financial Synergy. These businesses supplement its market-leading data business that is central to the operating systems of nearly all the world’s largest buy-side fund managers.

Today the group’s chief executive told investors to expect “strong” revenue and profit growth in 2017 thanks to the performance of its core wealth management business and due to the contributions from new acquisitions.

Despite its acquisitive growth, Iress remains in sound financial health with net debt standing at $156 million as at December 31 2016, which is just 1.3x its annual profit.

The group’s super-sticky products also generate recurring revenues, strong cash flows, and offer a defensive nature to investors focused on the long term.

This is the kind of business with a moat thanks to its market-leading technology that should tick the boxes for smart investors focused on solid long-term total returns.

Probably the only box Iress does not tick is valuation unfortunately.

At $12.30 today shares change hands on around 33x trailing earnings with management’s forecasts to expect another “strong” year of growth. I have the stock on my shopping list and expect I will be able to pick it up 10% cheaper prior to it delivering its half-year results in August 2017.

Other options in the software and technology space to consider include logistical high flyer Wisetech Global Ltd (ASX: WTC) or junior startup Praemium Ltd (ASX: PPS).

Iress looks a little expensive, unlike this Massive Dividend Stock to Buy Today (6.7% Current Gross Yield!)

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Motley Fool contributor Tom Richardson owns shares of IRESS Limited.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of WiseTech Global. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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