Up 175% in a year, do experts think it's time to sell this ASX 200 tech stock?

Strong defence demand support strong growth, but does valuation still allow upside?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASX 200 tech stock Codan Ltd (ASX: CDA) has been on an extraordinary run.

Over the past 12 months, the ASX 200 tech stock has surged around 175%, rewarding investors handsomely. And the momentum hasn't slowed; shares are up 20% in just five days, 35% over the past month, and 52% year to date.

After such a powerful rally, investors are now asking the obvious question: is it time to take profits, or could there be more upside ahead?

A female soldier flies a drone using hand-held controls.

Image source: Getty Images

Firing on multiple fronts

Codan isn't your typical ASX 200 tech stock. The company develops electronic solutions for government, military, corporate, and consumer markets globally. Its operations are split into two key divisions: communications and metal detection.

Both are currently performing strongly. The communications segment is benefiting from rising geopolitical tensions, which are driving increased demand for defence and public safety technology. In conflict scenarios, communication systems are mission-critical and often upgraded early.

Codan is seeing solid demand across this segment. Particularly in areas that are linked to unmanned systems and software-defined radios, which are being adopted across a growing range of applications.

At the same time, margins are improving. The company now expects communications margins to reach 30% in FY26 — earlier than previously forecast — up from around 26% in FY25. That kind of margin expansion can significantly boost earnings.

Gold boom fuels metal detection

Codan's second engine is its Minelab metal detection business.

This division has experienced strong sales of gold detectors, particularly in regions such as Africa where small-scale mining activity is common. As gold prices rise, so does interest in prospecting and that flows directly into demand for Codan's products.

There's also steady demand from recreational users globally, adding another layer of growth.

Thanks to these tailwinds, the ASX tech stock now expects FY26 revenue growth to land at the top end of its previously guided 15% to 20% range.

What do analysts think?

Despite the strong performance, broker sentiment is more cautious.

According to TradingView data, most analysts rate Codan shares as a hold. The average 12-month price target sits slightly below current levels.

Bell Potter is among those urging caution. The broker recently retained a hold rating and lifted its price target to $41.30, still below the recent share price of around $43.

Bell Potter noted:

With relatively high levels of R&D spend strengthening CDA's competitive advantages across its businesses, CDA is well positioned to benefit from increased demand for mission-critical connectivity solutions in both defence and public safety markets. We believe CDA shares trade at fair value on 33x FY26 EV / EBIT amidst improving operating momentum and improving outlook in both segments.

Foolish Takeaway

Codan is delivering strong growth across both of its core divisions. Powerful global trends in defence and gold demand also support the ASX tech stock.

But after a 175% surge, much of that optimism may already be priced in. For investors, the question now isn't whether the business is performing, it's whether the valuation still leaves room for upside.

Motley Fool contributor Marc Van Dinther has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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.

More on Technology Shares

A bright graphic showing neon green and red arrows in a downwards direction with a world map behind them in neon blue
Technology Shares

Does Macquarie rate Life360 shares a buy, hold or sell?

Does recent share price weakness present an opportunity?

Read more »

An oil worker in front of a pumpjack using a tablet.
Technology Shares

Why are shares in this ASX tech stock, which operates in the oil and gas space, charging higher?

Even after this share price jump, the shares could be good value.

Read more »

A man has computer-generated images rushing through his head, indicating an AI (artificial intelligence) concept of a communication network.
Technology Shares

Up 14% in April, is it too late to buy WiseTech shares?

The stock remains well below its highs and may now offer a more compelling opportunity.

Read more »

Focused man entrepreneur with glasses working, looking at laptop screen thinking about something intently while sitting in the office.
Technology Shares

Up 670%: Is it too late to buy this ASX defence stock?

This high-flying stock could still have further to run according to Bell Potter.

Read more »

Man happy to be holding a blue cloud representing cloud computing.
Technology Shares

3 ASX shares benefiting from the rise of digital infrastructure

Artificial intelligence and cloud computing need the help of these shares.

Read more »

Soldier in military uniform using laptop for drone controlling.
Technology Shares

Why this ASX defence stock is falling today despite a massive 660% run

EOS shares pull back as a contract delay offsets a solid quarterly result.

Read more »

Happy couple looking at a phone and waiting for their flight at an airport.
Technology Shares

ASX tech stock charges higher on big acquisition news

Let's see what the software company has announced this morning.

Read more »

A young man talks tech on his phone while looking at a laptop with a financial graph superimposed across the image.
Technology Shares

These beaten down ASX 200 tech stocks could rise 55% to 60%

Brokers think these stocks could rise strongly from current levels.

Read more »