The ASX tech stock Nuix Ltd (ASX: NXL) has soared 186% in 2024 to date and has rocketed 294% in the last 12 months. After such an incredible rise, some investors may worry the business is close to the end of its rally.
However, the investment team at Blackwattle believes the Nuix valuation is still attractive. The fund manager described the business as a provider of specialised software used to investigate and analyse large pools of data.
Reporting season was a strong period for the ASX tech stock, with a rise of 38% in August after the company announced better-than-expected earnings guidance for FY25, according to Blackwattle.
Earnings recap
In the FY24 result, annualised contract value (ACV) grew 14% to $211.5 million, revenue grew 20.9% to $220.6 million, operating profit (EBITDA) increased 60.2% to $55.9 million, and the bottom line improved more than 100% to $5 million.
As mentioned, the business gave some commentary about its strategic targets for the 2025 financial year.
It's expecting around 15% ACV growth in constant currency terms compared to FY24.
The ASX tech stock said that it's expecting a continued successful rollout of Nuix Neo. Why is that good? Each Nuix Neo sale is approximately two to three times the size of a non-Neo sale. The Nuix Neo ACV at the end of FY24 was $12.1 million, up from $4.1 million in the first half of FY24. These sales are to both new and existing customers, with a significant take-up by customers with existing Nuix products.
There are three core use cases for Nuix Neo – data privacy, investigations and legal. The legal offering was launched in June 2024.
Another expectation for FY25 is that revenue growth should exceed operating cost growth.
Excluding net non-operational legal costs, the underlying cash flow is forecast to be positive for the 2025 financial year annual result. In FY24, underlying cash flow rose 171% to $24.7 million.
Why be positive on this ASX tech stock?
Blackwattle revealed that its current investment in the company is based on an expectation of improving quality for Nuix following its organisational rebuild.
The fund manager said in the last two years, CEO Jonathan Rubinsztein has built a new senior leadership team and helped develop a new company culture that "matches the quality of the company's products."
Concluding its buy-case for Nuix shares, Blackwattle said:
Nuix is a clear leader in its field, has enviable blue-chip clients and it's aided by strong sector tailwinds given the world's increasing data usage. Despite the recent share price run we see plenty more upside as the stock still trades at a significant discount to global peers.
