Why the Technology One Limited share price jumped higher today

The Technology One Limited (ASX: TNE) share price has jumped higher this morning after the enterprise software company reported a solid half-year result.

At the time of writing its shares are up 2.5% to $5.67.

Highlights from today’s release include:

  • Half-year revenue increased 13% on the prior corresponding period to $113.9 million.
  • Initial licence fees increased 30% to $24.1 million.
  • Annual licence fees up 10% to $47.9 million.
  • Cloud services fees up by 93% to $19.9 million.
  • Half-year profit after tax jumped 10% to $8.1 million.
  • First-half earnings per share of 2.5 cents.
  • Half-year dividend up 10% to 2.6 cents per share.

Overall I thought this was a strong result from Technology One and I can’t say I’m surprised to see its shares edge higher.

The performance of its cloud services segment was especially impressive. With more and more businesses moving to the cloud, I expect this segment to continue its strong growth for some time to come.

Should you invest?

Based on today’s result Technology One’s shares are changing hands at approximately 43x trailing earnings.

Whilst I think the company is a high quality one with a lot of growth ahead, I think its shares are fully valued now and offer limited upside potential.

For this reason I would suggest investors consider other software shares such as Altium Limited (ASX: ALU) and Hansen Technologies Limited (ASX: HSN).

I think both these shares are far better value for money right now and could provide investors with outsized returns over the long-term.

Alternatively, these fast-growing shares could be even better options for investors in my opinion. Each has been growing like wildfire and shows no signs of slowing.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of Altium and Hansen Technologies. 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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