TechnologyOne Ltd (ASX: TNE) shares were in fine form on Tuesday.
The ASX 200 tech stock ended the day almost 5% higher at $16.75.
Investors were fighting to get hold of the company's shares following the release of its half-year results.
In case you missed it, TechnologyOne reported a 16% increase in revenue to $244.8 million, a 21% lift in annual recurring revenue (ARR) to $423.6 million, and a 17% jump in profit before tax to $61.5 million.
This went down well with the market and put a rocket under its shares. But is it now too late to invest? Let's find out.
Can this ASX 200 tech stock keep rising?
The team at Bell Potter was impressed with this result. It commented:
1HFY24 revenue excluding interest grew 15% to $241.0m and was 1% above our top-of-the-market forecast of $238.1m. PBT grew 17% to $61.5m but was close to in line with our forecast of $61.2m as the beat at revenue was effectively offset by a lower PBT margin of 25.1% versus our forecast of 25.5%.
But the real highlight was management's guidance upgrade. The broker explains:
The positive surprise of the result was the full year guidance of 12-16% PBT growth whereas Technology One historically has typically provided guidance of 10-15% growth. The company also said the full year PBT margin would increase by c.100bps which suggests a figure of 30.7%.
In light of this, its analysts believe there's still room for TechnologyOne's shares to keep rising from current levels.
According to the note, the broker has reaffirmed its buy rating with an improved price target of $19.00 (from $18.50).
Based on its current share price, this implies a potential upside of just over 13% for investors over the next 12 months. And if you include dividends, the total potential return stretches to almost 15%.
Commenting on its bullish view on the ASX 200 tech stock, the broker concludes:
We have increased the multiples we apply in the PE ratio and EV/EBITDA from 42.5x and 22.5x to 45x and 23.75x given an increase in the average multiple of the comps and the likelihood that Technology One will beat its FY24 guidance. There is, however, no change in the WACC of 9.1% we apply in the DCF. The net result is a 3% increase in our PT to $19.00 which is a 13% premium to the share price and we maintain our BUY recommendation.
