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Why the Class Ltd share price is soaring today

So far in 2016 shareholders of self-managed super fund (SMSF) software provider Class Ltd (ASX: CL1) have seen the value of their holdings rise by an incredible 83%.

Today the share price took another step higher after the company formally announced its full year results. As you will see below the fintech company produced a stunning result which well and truly justifies the rise in its share price this year in my opinion.

Highlights include:

  • Sales revenue up 45% to $22.5 million.
  • Net profit after tax up 71% to $5.8 million.
  • Earnings per share up 64% to 5.2 cents.
  • Final quarterly dividend of 1 cent, bringing the full year dividend to 3.75 cents per share unfranked.
  • Total billable portfolios up 37% to 112,441.
  • 19.2% share of the self-managed super fund market.

It’s not hard to see why Class is producing such strong results like these. It’s top rated software continues to grow in popularity and attract big-name clients. In May Class announced that it had signed its largest single contract for cloud-based SMSF software services with leading financial advisory and accounting services company named Findex.

This deal is expected to see over 8,000 SMSFs loaded onto the Class system over the next two years. Management expects this will allow it to accelerate its growth plans and extend its position as one of the largest SMSF administration providers in Australia.

With each billable portfolio now providing an average revenue of $233 per year, I believe the incredible growth in its numbers and the impressive 99.8% retention rate bode well for sustained long-term sales growth.

As I have previously mentioned, any fears over changes to superannuation in the most recent Federal Budget are not a concern to the company. It explained that as the company charges its customers on a per portfolio basis (rather than the overall fund balance) the size of the fund has no impact on the fees it charges.

As well as this, the company believes it could see an increase in demand for its accounting and reporting solutions for non-super investment portfolios should fund members with higher balances choose to invest outside of superannuation.

In my opinion Class is a great buy and hold investment that will reward shareholders in the long-term. Although its dividend is only very small at present, it has announced a policy to pay out between 50% and 80% of earnings in the future. As the company grows so too will its dividend, which makes it all the more appealing in my view and a better investment option than the likes of Reckon Limited (ASX: RKN) and Onevue Holdings Ltd (ASX: OVH).

Finally, before making an investment in Class I would highly recommend having a quick a look to see if you own one of these three rotten ASX shares. Each could be holding back your portfolio and stopping it from reaching its potential.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. 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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