The Gentrack Group Ltd (ASX: GTK) share price has been on fire over the past 12 months.
During this time, the ASX tech stock has risen a remarkable 140%.
This has been driven by the utilities software company's strong performance in FY 2024 and positive growth outlook.
Is it too late to invest?
The good news is that analysts at Goldman Sachs don't believe it is too late to invest in this ASX tech stock.
According to a note, the broker has reiterated its buy rating on Gentrack's shares with an improved price target of NZ$11.75 (A$10.83).
Based on its current share price of A$9.65, this implies potential upside of 12.2% for investors over the next 12 months.
And with the tech sector likely to sink today after a selloff on Wall Street, it's probable that this ASX tech stock will be trading lower than yesterday's close price during today's session. This would mean even greater potential returns could be on offer.
Why is it an ASX tech stock to buy?
There are a few reasons why Goldman Sachs is bullish on this high-flying stock. The first is its belief that the company is well-placed to easily achieve its guidance. It said:
We are increasingly confident of GTK's growth outlook underpinned by +23% FY23-26E core revenue CAGR and we see possible upside in November with management's track record of upgrading and beating guidance, alongside flat 2H growth assumptions implied by FY24 guidance. Potential upside into FY25 could come from the transition of the back book to g2.0 in the core business, success in GTK's international strategy (EMEA/APAC), and expansion into new markets via M&A.
Another reason to buy according to the broker is its international expansion, which Goldman highlights could drive its shares even higher. It explains:
Our bull case valuation (NZ$18.40, +79% upside) is underpinned by success in international expansion and strong contract momentum in core markets resulting in +15% FY24-28E revenue CAGR, in line with management targets but above our base case (+12% FY24-28E revenue CAGR). On our base case (NZ$11.50, +12% upside), we believe GTK represents good value and see downside protected given we assume modest international growth. On this basis, market pricing (NZ$10.30) may be placing minimal value on GTK's ability to grow its international pipeline despite continued investment and recent customer wins.
Finally, despite all this, the broker highlights that the ASX tech stock trades at a growth-adjusted discount to peers. It said:
GTK's FY25E EV/EBITDA of ~20x (R&D adj.) and +27% EBITDA growth CAGR (0.77x growth-adjusted) compares favourably to peers at ~1.4x, despite trading at a NTM EV/EBITDA premium, particularly when considering the strength of GTK's contract pipeline, potential to outperform at the FY result, and possible upside to our estimates over time.
