The Sage Group PLC (LSE:SGE)’s tumble following results this week offers investors another chance to buy into the software company, Jefferies analysts believe.
Shares had faced a blow after interim underlying revenue growth of 10% to £1.15 billion and a 23% jump in per-share earnings to 18.2p appeared to underwhelm midweek.
However, Jefferies batted off concerns over a downtick in revenue expectations, reiterating a ‘buy’ rating for the FTSE 100-listed firm.
“The durability of growth, margin upside, and cash generation mean that the share price reaction is a second opportunity to own one of the better growth compounders in the sector,” the investment bank said in a note.
New customer acquisition signalled growth of 5-6%, Jefferies acknowledged, below ambitions for a double-digit increase.
That said, retention rates remain unchanged, so assuming renewals hold up, Jefferies added annual recurring revenue should increase as expected ahead.
“Sage continues to have attractive cash generation characteristics,” analysts noted, with largely unchanged forecasts prompting the bank to reiterate a 1,400p price target, against Thursday’s close of 1,084.5p.