Motley Fool Australia

The Nitro (ASX:NTO) share price is down 20% in a month. Time to invest?

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After surging to a 52-week high of $3.66 in late October, the share price of ASX mid-cap technology company Nitro Software Ltd (ASX:NTO) has come off the boil more recently. The Nitro share price has slid more than 20% lower this month and is down 2.14% to $2.74 in opening trade today.

It joins a growing list of companies, including the likes of Megaport Ltd (ASX:MP1) and Whispir Ltd (ASX:WSP), whose share prices all stormed to new highs this year, but have struggled to maintain their momentum as COVID-19 restrictions ease across the country.

About the company

Nitro develops a suite of software solutions that allow individuals and businesses to streamline and digitise document workflows. Companies can create, edit, sign and store important documents entirely online, reducing the need for traditional forms of hardcopy file management. Not only does this simplify workflows, but it can massively reduce printing costs for large companies, and even make them more environmentally friendly.

Despite facing stiff competition from US tech giant Adobe Inc, Nitro excelled during 2020. The COVID-19 pandemic disrupted its sales pipeline early on, but Nitro was able to tailor its product offering to meet the unique demands of the “new normal” of remote working. It made the extremely canny decision to make its eSignature solution free throughout 2020 to help support companies as they transitioned to working from home.

Results for the most recent quarter, ending 30 September 2020, were positive across just about all financial metrics. Cash receipts from customers increased by 17% quarter-on-quarter to $11.6 million, and subscription annualised recurring revenues (ARR) was ahead of prospectus forecasts. The company also ended the quarter with a strong balance sheet, comprising $44.4 million in cash and no debt.

Nitro remains bullish on the outlook for the remainder of this calendar year. Full year revenue is expected to be in line with its prospectus forecast at $40.5 million. Subscription ARR is anticipated to be between $26 million and $27 million, well ahead of the $24.4 million forecast in the prospectus.

Is the Nitro share price a buy?

Nitro is a favourite of our analysts here at Motley Fool. They’ve twice recommended it to our Extreme Opportunity subscribers. The first time was back in February, when Nitro shares were trading at around $1.70, and the second time was in early September.

Our analysts like the company’s rapid subscription growth, strong sales pipeline, and the savvy way it launched its new eSignature product. They were also impressed with how well the company adapted to working under COVID-19 restrictions.

If you agree with our Foolish analysts, now might be a good time to pick up shares of Nitro while the price is dipping. Who knows how far it could climb next year!

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Returns as of 6th October 2020

Rhys Brock owns shares of MEGAPORT FPO, Nitro Software Limited, and Whispir Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends MEGAPORT FPO and Whispir Ltd. The Motley Fool Australia has recommended MEGAPORT FPO, Nitro Software Limited, and Whispir Ltd. 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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