Fintech leader Iress Ltd sells super business to MainstreamBPO Ltd

Iress Ltd (ASX:IRE) could be among the best growth stocks on the S&P/ASX 200 (Index: ^AJXO) (ASX:XJO).

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Perhaps Australia's leading financial technology business in Iress Ltd (ASX: IRE) today announced it has agreed to sell part of its superannuation administration platform business to listed funds and investment administrator MainstreamBPO Ltd (ASX: MAI).

The total cost for Mainstream BPO in acquiring the business is $3.5 million, with Iress flagging that the sold business contributed an annualised $0.3 million in segment profit.

The deal is not material to a business the size of Iress that posted $123.5 million in profit for the six months ending December 31 2016, with a forecast for another year of "strong" revenue and profit growth over calendar year 2017.

Iress has also been on an acquisitive spree recently, including a $90 million deal to acquire superannuation software platform Acurity that it is now coupling with its XPLAN administration platform in an effort to grow market share.

Outlook

Iress is diversifying its earnings by both product and geography, however, its core business remains the provision of financial markets data and software to the asset management industry across Australia and the UK. Its market-leading technology and integration into the operational processes of the world's largest money managers offer recurring revenue streams that go a long way to making a high-quality investment opportunity.

Today, Iress shares hit a record high of $12.90, although given its recent acquisition spree it's a hard business to value. It currently sells for around 28x analysts' estimates for 2017's full year earnings with a trailing fully franked 3.5% yield. I like this business as an investor, but would prefer to wait until it reports its financial results in the middle of August before buying more shares given its current valuation.

Motley Fool contributor Tom Richardson owns shares of IRESS Limited. You can find Tom on Twitter @tommyr345 The Motley Fool Australia has no position in any of the stocks mentioned. 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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