This tech stock just hit a 52-week low. Is it a bargain buy?

The share price of software provider Integrated Research Limited (ASX: IRI) has fallen another 4% to a 52-week low of $1.90 in Monday trade. The share price has now fallen 22% since last Tuesday’s announcement which revealed that the company’s CEO John Merakovsky had handed in his resignation for personal reasons. It later emerged that Mr. Merakovsky will join the Wesfarmers Ltd (ASX: WES) subsidiary Flybuys as its new CEO.

Integrated Research is normally a thinly traded small cap, but volumes have jumped over the last several trading days following the CEO’s resignation. The resignation follows last month’s announcement of Steve Killelea’s retirement from the Board as both the Chairman and a Non-Executive Director.

Steve Killelea is the founder of Integrated Research and the company’s largest shareholder with a 39.5% stake in the business. He has subsequently entered into a consulting contract with Integrated Research for 2 years to provide assistance and act in an advisory capacity to the Strategic Committee. Furthermore, he has also indicated that he has no immediate plans to reduce his ownership stake.

Is it time to buy? 

Integrated Research has provided performance monitoring, diagnostics and management software solutions for business-critical computing environments via its Prognosis products for 30 years. The company boasts an impressive amount of blue chip clients with over 125 of the Fortune 500 using its products. New customers such as BHP Billiton Limited (ASX: BHP) and Coles Group Limited (ASX: COL) were also added in FY18 among others.

By the company’s high standards, FY18 was a subdued year with revenue flat at $91.2 million and net profit after tax increasing by only 4% to $19.2 million. Revenue was flat due to a cyclical downturn in the company’s Infrastructure line and underperformance in its Payments line. The weakness in these 2 business lines was offset by growth from the Unified Communications and Consulting Services lines.

At current prices, shares of Integrated Research are trading for around 16 times the FY19 consensus estimate of 11.95 cents. Hitting this number would represent earnings growth of around 7% over a soft FY18. This is the cheapest valuation the company has traded for in quite some time and the last time the share price traded at these kinds of levels was in April 2016.

An underwhelming FY18 relative to its growth in prior years and the departure of key personnel warrants some caution for investors even at these kinds of prices. Therefore, it might be prudent to wait until the company reports its interim results in February before opening a position. In the meantime, investors can consider these dividend picks for 2019.

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Motley Fool contributor Tim Katavic has no financial interest in any company mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Integrated Research 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 Scott Phillips.

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