Why the Integrated Research share price is cascading 15% today

Clouds gather around Integrated Research amid latest trading update.

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Key points
  • The Integrated Research share price is down 15% to 57.8 cents 
  • Delayed purchasing and an unresponsive US market have led the company to guide for a poorer result than last year 
  • Pro-forma revenue is forecast to be 3% to 7% lower than FY21 

The Integrated Research Limited (ASX: IRI) share price has hitched a ride to the downside on Monday.

At the time of writing, shares in the performance management software solutions provider are 15.4% in the red at 57.5 cents apiece. In stark contrast, the S&P/ASX 200 Index (ASX: XJO) is 0.23% better off than where it finished Friday afternoon.

Today's fall is yet another blow to the Integrated Research share price, taking it down 74% in the past year. The selling pressure has mounted following a disappointing downgrade in guidance, as shared in the company's FY22 trading update.

Rede arrow on a stock market chart going down.

Image source: Getty Images

Setting lower expectations

Concerned Integrated Research shareholders are selling out today as the company pulls back the curtain on performance. It appears the FY22 full year is shaping up to be a letdown compared to last year based on the latest trading update.

While specific guidance couldn't be given that a large portion of sales are concentrated to the end of the financial year, Integrated Research did guide compared to the previous year.

According to the release, performance in the United States operations has not experienced the uplift that was anticipated. However, strong sales are being seen across the Asia Pacific region and the United Kingdom.

Though, Integrated Research is now expecting subdued performance compared to the prior year. Notably, new sales have underperformed expectations as customer purchasing patterns are delayed. For reference, new sales represented 37% of total contract value (TCV) year-to-date.

In light of this, pro-forma revenue is forecast to be down between 3% to 7% in FY22. Additionally, the company is expecting profitability to continue, but net profit after tax (NPAT) will likely be below that of last year.

From here, the next key update is anticipated to hit the ASX in mid-July. This will follow the end of the FY22 financial year for Integrated Research.

How does the Integrated Research share price compare?

Currently, Integrated Research is trading on a price-to-earnings (P/E) ratio of 12.2 times. This compares to an average 29.1 times ratio for the Australian software industry.

While it might appear 'cheap' on a fundamental basis, it is important to consider that the company's earnings have been declining during the last 18 months. For example, at the end of June 2020, Integrated Research posted earnings of $24.05 million. Whereas, at the end of December 2021, this figure was down to $9.59 million.

The Integrated Research share price is down 55% since the beginning of the year.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Integrated Research Limited. 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 Scott Phillips.

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