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Why the Integrated Research share price rocketed 32% higher today

One of the best performers on the Australian share market on Thursday morning has been the Integrated Research Limited (ASX: IRI) share price.

The software company’s shares are up a remarkable 32% to $2.19 in early trade following the release of a trading update.

Whilst this is great news for shareholders, it is worth noting that its shares are still down 45% over the last 12 months.

What was in the Integrated Research update?

This morning the company revealed that it is in the early stages of preparing its half year results for the six months ended December 31.

Based on internal management accounts, management expects to report revenue in the range of $49 million to $50.5 million for the half. This represents a 7% to 11% increase on the prior corresponding period.

On the bottom line management anticipates an even stronger result, with profit after tax expected to be in the range of $11.1 million to $11.7 million. This represents 19% to 26% growth on the prior corresponding period.

A key driver of growth for the company was its Licence sales. They are expected to be in the range of $30 million to $31.5 million, representing 17% to 23% growth. This was underpinned by a return to growth from its European operations and a significant contribution from the Payments product line.

What now?

I can’t say I’m surprised by the buying frenzy today because things were looking very bleak for the global provider of proactive experience management solutions for critical IT infrastructure, payments and communications ecosystems after a bitterly disappointing FY 2018 and the sudden resignation of its CEO.

But it appears to have rectified things very quickly, making it an interesting option for investors at just 18x estimated FY 2019 earnings.

While I would still choose Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX) ahead of Integrated Research, if it can maintain this level of performance in the second half and into FY 2020 then I expect it to be a very rewarding investment.

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