Shares in Iress Ltd (ASX: IRE) have been heavily sold off this week following the company's results announcement, begging the question, are they now looking cheap?
The analyst team at Morgans certainly think so, with a buy recommendation on the shares and a share price target which has some serious upside.
We'll get to that shortly. First, let's look at what Iress announced.
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Solid results but weaker than expected
The financial data company said on Monday that it had delivered a "solid" result, with improved earnings quality driven by disciplined execution.
Net profit came in at $32 million for the first half, up 85% on the same period in the previous year, while underlying net profit was up 18.4% to $38.8 million.
For the continuing business, revenue increased 2.5% on a constant currency basis to $250 million.
Iress declared a first-half dividend of 14 cents, up 27.3%.
The company's Managing Director Andrew Russell said of the result:
Execution has shifted from simplifying the business to investing in product evolution and sustainable growth. We are evolving our products, accelerating engineering capability and increasing delivery velocity through our partnership with Thoughtworks and the disciplined adoption of AI. While revenue growth is expected to remain measured in the near term, we are confident in our strategy and in delivering our FY26 Cash EBITDA margin exit run-rate target of 25%. Our focus is on building a higher quality software business with better products, stronger customer relationships and disciplined capital allocation to create sustainable long-term value.
For the full year, the company is expecting to grow underlying profit by 15% to 21%.
Shares in this ASX technology company looking cheap
The Morgans team said the result was softer than expected, "with slower revenue momentum along with currency headwinds the main drivers''.
The broker added:
IRE has executed on stabilising the business over recent years. Further efficiency plans are now underway; however, improving the customer proposition and new product initiatives are required to drive organic revenue growth. We view IRE's earnings base as more defendable and free cash flow as largely improving. Corporate appeal adds to the investment case.
Morgans said that Iress had delivered on annualised cost savings of $31.5 million ahead of schedule, and was targeting another $6 to $9 million in savings in the second half.
Morgans reduced its price target for Iress from $10.35 to $9.65. This is still 44.4% higher than the current share price of $6.68.
The broker expects Iress to pay a full-year dividend yield of 4% this year, rising to 4.7% by 2028.
Iress is valued at $1.31 billion.
