The Integrated Research Limited (ASX: IRI) share price suffered a sharp drop in the second half of 2018. Integrated traded in the high $3's before hitting a three year low of $1.50 in 2018. Since the start of 2019, the Integrated share price has gained some momentum and currently trades at $2.30.
Will this momentum continue?
In FY18 Integrated reported a flat revenue figure with minor increases in earnings per share and net profit by 3% and 4% respectively. This was primarily due to a weak performance from its infrastructure product group and the European region overall. Given the high valuation it had at the time, a performance as such is likely to send the Integrated share price tumbling.
However, the recent half-year results show promise
Integrated reported revenue increases of 10% and net profit increases by 26%. Earnings per share rose from 5.41 to 6.82 cents. Despite Integrated holding a flat cash balance from the previous half-year of $9.6 million, organic cash growth in its operating activities was evident. Additionally, the payments product line which previously underperformed alongside infrastructure experienced strong growth in the half-year.
Currently Integrated trades at a PE of 19.3 which is significantly cheaper compared to the industry PE of 108. If Integrated can continue to grow earnings at its current rate, a trading price of $2.30 could be a bargain.
Future growth of Integrated appears strong with a continuing demand for its market-leading software, Prognosis. The continual investment that Integrated places into prognosis will only increase the effectiveness and efficiency of the software. Currently Integrated has over 125 customers listed on the Fortune 500 with numbers continuing to grow. Just this half-year, Integrated managed to increase its customer base by 20 and recorded an annual maintenance retention rate of 95%.
Like many other growth-focused companies, Integrated is another company which derives the majority of its revenue outside Australia. As growth is abundant in offshore markets, investors with a growth focus should be looking in those directions for future returns.
Foolish takeaway
Provided that Integrated Research can continue the growth in the recent half-year, the $4.00 all-time high could well be reached in due course. With the directors of Integrated buying around the current share price, investors may want to do the same.
