Broker tips Bravura (ASX:BVS) share price to storm 20% higher

The Bravura Solutions Ltd (ASX:BVS) share price could be storming 20% higher from here according to one leading broker…

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The tech sector is a sea of red today but that hasn’t stopped the Bravura Solutions Ltd (ASX: BVS) share price from charging higher.

The financial technology company’s shares ended the day with a gain of 3% to $3.24.

Why is the Bravura share price avoiding the selloff?

The catalyst for the solid performance by the Bravura share price on Thursday appears to have been the release of a positive broker note.

According to a note out of Goldman Sachs this morning, its analysts have retained their buy rating and lifted their price target on the company’s shares to $3.90.

Based on the current Bravura share price, this implies potential upside of 20% over the next 12 months excluding dividends.

Why is Goldman bullish on Bravura?

Goldman Sachs notes that earlier this week Bravura reiterated its FY 2021 guidance for net profit after tax of $32 million to $35 million and second half revenue growth of 10% half on half.

Goldman said: “Given there is less than two months of FY21 to go there is increased likelihood vs the February update that the guidance will be achieved. Brexit and then COVID have disrupted BVS new client wins. The company is now experiencing positive momentum, including increased client engagement in the UK as the economy opens up with the vaccine roll-out.”

Significant medium term opportunity

With the company now recovering from a difficult period, Goldman appears confident it is onwards and upwards from here thanks to its significant market opportunity.

It explained: “The medium term opportunity for BVS looks significant: it is estimated by the company its TAM in the UK is ~GBP1.2bn and in Australia ~A$1.0bn with a current market share of c.10% and c.5% respectively, providing a significant runway for growth. We expect earnings to recover in FY22, driven by new client wins from the strong pipeline with a resumption in UK demand from projects delayed in part by COVID. While we acknowledge that there is still some uncertainty around timing of wins, we think the risks are reducing as the UK re-opens.”

Attractive valuation

Another reason that Goldman Sachs is bullish on the Bravura share price is its valuation, which it feels is undemanding.

Goldman commented: “The valuation for BVS looks undemanding and it is trading at the bottom end of its historical trading range on both a P/E and EV/EBITDA basis; it is currently trading at an FY21/FY22 EV/EBITDA of 14.3x/11.1x. […] Our 12m TP moves up +5% to A$3.90, implying a 24% total return; we reiterate our Buy rating.”

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Bravura Solutions Ltd. The Motley Fool Australia has recommended Bravura Solutions Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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