Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

RBC insights: TechnologyOne's advantages & growth prospects

EditorOliver Gray
Published 24/05/2024, 11:57 am
© Reuters.

Investing.com - According to a recent research note by RBC analysts, Technology One Ltd (ASX:TNE) holds a competitive edge in the market due to its unique business model, robust product offerings, and strong cybersecurity credentials. These factors, coupled with the company's commitment to research and development (R&D), position it for significant growth in the coming years.

One of TechnologyOne's key competitive advantages lies in its cloud ERP system, Connected Intelligence Anywhere (CiA). This system provides users with access to the company's entire suite of products through a single cloud-based solution, offering a level of simplicity and efficiency that stands out in the market.

The company's "Power of One" approach, which consolidates all functions from product development to sales, implementation, and support, resonates with a risk-averse customer base. This approach allows for faster implementation and better relationship management, contrasting with competitors who rely on system integrators for implementation.

TechnologyOne's robust cybersecurity credentials, the highest among any ERP vendor in Australia, add to its appeal, particularly for risk-averse sectors such as Local Government, Education, and Government.

⚠️SPECIAL PROMOTION! Enjoy InvestingPro tools and strategies for A$13.9/month thanks to a limited-time discount on the 1-year Pro subscription! CLICK HERE to take advantage before it's too late, and know which stocks to buy and which to avoid no matter the market conditions!⚠️
InvestingPro ProTips reveals pertinent data at a glance!

Track your favourite companies using InvestingPro! Unlock access to AI-powered ProPicks, ProTips and more! Use coupon code INVPRODEAL and receive an additional 10% off!

RBC's analysis also highlights TechnologyOne's growth drivers, which include increasing its APAC customer ARR whitespace from ~$2bn to ~$4bn over the next five years and focusing on new logos primarily in the Education Vertical in the UK.

The company's strong balance sheet, estimated to have over $200m net cash by FY24e, gives it the flexibility to pursue mergers and acquisitions (M&A) to further drive growth. In particular, the UK student management space remains an attractive opportunity for M&A.

In terms of market pricing, RBC's forecast sits broadly in line with consensus at the EBITDA line in FY24 and FY25. The firm anticipates that growth in the UK will be accompanied by increased marketing and employee costs over the next few years.

RBC has given TechnologyOne a Sector Perform rating with a $18.00 per share price target, based on a 50/50 DCF and terminal exit multiple valuation. The firm expects a +2% implied total return forecast to the last closing price.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.