Objective Corporation Limited (ASX: OCL) has released its FY21 outlook prior to its AGM today. In it, the company committed to a growth strategy based on digital engagement, research and development, and building recurring revenue streams. In year to date trading, the Objective share price has more than doubled, growing by 109% at the time of writing.
FY20 was a benchmark year for the IT services and products company. It achieved a 22% increase in annual recurring revenue, cresting at $56.6 million. Simultaneously, it has grown net profit after tax (NPAT) by 22%. let’s take a closer look.
What’s driving the Objective share price?
Objective builds products largely for government and regulated industries. During FY20, the company saw fast growth for the Objective GOV365 product. This is a governance product for Microsoft teams. During FY20, Microsoft teams went from 20 million to 75 million daily users. Thus helping to protect commercially sensitive data.
The Objective share price benefited from positive trading updates during the COVID-19 pandemic. In fact, it reached new highs after the release of the FY20 annual report showing record growth. During FY21, the company has already acquired regulation technology specialist Itree. This is a cloud-based product company active in Australia and New Zealand. It was profitable on acquisition.
Objective continues to spend 20% of revenues on research and development, and is accelerating its integration of the Itree product.
It has also accelerated its growth through acquisitions. The company has honed its skillset in re-branding, integrating and delivery of products to market as a result, and gained praise for its customer service.
In the Gartner Magic Quadrant for content services platforms, analyst company Gartner Group recently stated:
Objective had the highest Gartner Peer Insights scores for product capabilities and the ability to meet organisational needs.
It was also in the top five for ease of experience and overall experience, indicating that users of the solution are generally happy with both the service and product.
Objective plans to fully integrate two additional products, RegWorks and Reach into its platform, as well as leveraging artificial intelligence and machine learning. Its digital engagement strategy aims to leverage its Objective Redact product, currently 50% of US revenues.
On the financial front, Objective follows conservative accounting practices, and has reiterated its intention to be disciplined with all acquisition opportunities. It also underlined its expectation for material growth in revenue and profitability through the year, focussing on conversion to subscription based contracts.
The Objective share price opened at $13.11 today, and is currently trading up 0.61% at $3.18.
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Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Objective Limited. The Motley Fool Australia has no position in any of the stocks mentioned. 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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