Is the TechnologyOne (ASX:TNE) share price a buy after its results?

Is this tech share in the buy zone?

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The TechnologyOne Ltd (ASX: TNE) share price was a poor performer on Tuesday.

The enterprise software company's shares dropped almost 3% to $12.55 following the release of its full year results.

Why did the TechnologyOne share price fall?

The softness in the TechnologyOne share price appears to have been driven by its results falling a touch short of expectations.

For example, the company delivered revenue growth of 4% to $312 million. As a comparison, according to a note out of Bell Potter, its analysts were forecasting revenue of $315.1 million.

In addition, the broker highlights that TechnologyOne's final dividend was increased 8% to 10.35 cents per share, whereas its analysts were forecasting a 10% increase.

That said, there were far more positives that negatives from the result according to Bell Potter.

For instance, Technology One still outperformed the broker's profit expectations despite its revenue miss. Profit before tax (PBT) grew 19% to $97.8 million, which was the high end of the company's guidance range and 1% ahead of Bell Potter's forecast of $97.1 million.

This was driven by lower than expected expenses. The broker highlights that total expenses (including R&D and D&A) were down 1% despite the company guiding to flat expenses and increasing its R&D spend by 13% year on year.

Another highlight for the broker was the company's key metric of SaaS annual recurring revenue. It notes that this grew 43% in FY 2021, which was ahead of its forecast of 35%.

Is this a buying opportunity?

Bell Potter appears to believe the weakness in the TechnologyOne share price is a buying opportunity. This morning it retained its buy rating and $15.00 price target on the company's shares.

Based on the current TechnologyOne share price, this implies potential upside of almost 20% for investors.

It commented: "We have updated each valuation used in the determination of our price target for the earnings changes as well as market movements and time creep. […] The net result, however, is no change in our PT of $15.00 which is >15% premium to the share price so we maintain our BUY recommendation. Overall we are encouraged by the strong conversion of customers to SaaS and the material benefits this brings to the company."

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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