Class Ltd report card shows 109% growth in earnings

Class Ltd (ASX: CL1) has today reported its first results as a listed company.

For the six months ending 31 December 2015 the provider of cloud-based administrative software solutions reported sales revenue of $10.7 million, an underlying net profit after tax of $2.8 million and underlying earnings per share (EPS) of 2.6 cents.

Importantly, the growth on the prior corresponding half for revenue, NPAT and EPS was 48%, 111% and 109% respectively. The Class share price was up 1.6% at $1.955 in early trading.

Impressive operating metrics

For investors analysing Class Ltd, customer and portfolio levels provides key insights…

  • Over the past half year, the group grew its billable portfolios by 14,814 to 96,637
  • Meanwhile, the number of customers grew by 101 to 844
  • As at December 31, Class Ltd had a near 17% share of the self-managed super fund (SMSF) administration market


Interestingly, unlike most ASX-listed companies Class Ltd pays dividends on a quarterly basis…

  • The group has declared an unfranked second quarter dividend of one cent per share with the stock due to trade ex-dividend on February 12 and payment scheduled for March 7.
  • Class Ltd also provided dividend guidance to shareholders to expect an unfranked dividend of one cent per share for the remaining quarters of financial year 2016.

Better value elsewhere?

Having raised money via an initial public offer at $1 per share in December, Class Ltd’s share price has quickly raced higher and is currently trading around the $2 mark giving the company a market capitalisation of approximately $225 million.

The business model of Class Ltd is undoubtedly appealing but for investors looking for investment opportunities today the question remains whether it is smart to pay such a large premium for growth.

The heightened volatility which has seen the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) sink by 6% since the beginning of January is arguably creating some appealingly priced opportunities with better risk-reward profiles than those on offer from premium-priced stocks such as Class Ltd, Domino’s Pizza Enterprises Ltd (ASX: DMP) and Ramsay Health Care Limited (ASX: RHC).

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia owns shares of Class Limited. 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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