Data#3 Ltd (ASX: DTL) may not be the most well-known ASX tech share.
But the established IT services and solutions provider has been delivering returns for investors for years.
And Macquarie, which sees a 24% upside for the ASX technology stock, expects that trend to continue.
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What is Data#3?
Data#3, founded in 1977 as Powell Clark and Associates, started as an IT software consultancy business for small to medium-sized organisations.
Following a merger with Allbrand Typewriters and Office Machines in 1984, the new entity came to be known as Data#3.
The company listed on the ASX in 1997, and has proved to be a solid wealth builder for early investors.
Back in July 2015, Data#3 shares were changing hands for less than $1 each.
Now, Data#3 shares are trading at around $7.50 apiece.
From its early days as one of Queensland's first personal computer dealers, Brisbane-based Data3#, with operations across Australia and Fiji, continues to expand its footprint.
The IT company now has over 1,400 staff and opened a new office in Perth last week.
Strong results
Data3# posted gross sales of $2.8 billion for FY24, up 7.6% on the previous year.
That saw the company report a gross profit of $270.1 million for the financial year, an increase of 7.8% on FY23's result.
Where to next?
Macquarie has a price target of $9 on Data#3 shares.
That represents a potential total shareholder return of 24% over the next 12 months.
The broker is expecting Data#3 to steadily increase profits over the coming years.
The IT company's gross profit is forecast to grow to over $350 million for FY27.
In the near term, Macquarie expects Data#3's business to benefit as cloud migration and AI adoption continues.
Demand for Data#3's services will further increase as customers require support when Windows 10 reaches its end-of-life date in October, according to the broker.
DTL offers investors a high-quality exposure to thematics around AI growth and increased software adoption.
We expect the company to benefit from near-term tailwinds such as a 'Software Refresh' from Windows 10 to 11, as well as potentially benefiting from greater purchasing of AI PCs in the future, while still also generating a consistent (fully-franked) dividend yield (4%) and maintaining a return on equity >50%, considerably above WACC (MQe: 11%).
Foolish Takeaway
With a market cap of around $1.16 billion, Data#3 does not garner the level of attention of better-known ASX tech shares.
But with a track record of delivering strong results combined with a promising outlook, Data#3 certainly deserves a place on every ASX tech investor's watch list.
