Analysts at Canaccord Genuity raised their target price on software firm Netcall from 100.0p to 110.0p on Wednesday, following the group’s full-year earnings.
Canaccord noted that Netcall’s full-year sales and adjusted underlying earnings were both in line with its trading statement. However, the analysts also pointed out that adjusted underlying earnings of £3.4m were roughly 5% ahead of its estimates.
Annual contracted value increased 10% year-on-year, an acceleration Canaccord deemed as important as it underpinned its slightly raised forecast for 2022 and new forecast for 10% sales growth in 2023.
“This acceleration of ACV growth de-risks the forward estimates and is a consequence of fast-growing cloud subscription revenues, which increased by 26% in FY21 and now account for 31% of group (PY 26%),” said Canaccord, which also reiterated its ‘buy’ rating on the stock.
“There is also a large support revenue stream which combined form recurring revenues of 64% (PY 64%). We expect adj. EBIT margins to continue to be above 12% going forward as the IA transitions to profit in FY22E (post central costs), as it reaches a pivot point in annual sales which increased 20% in FY21.”
The Canadian bank upgraded 2022 adjusted EBIT/EPS by 4/3% and highlighted that at current levels, Netcall’s enterprise value/sales valuation was a 25% discount to the UK IT sector but did add that growth rate and margins were both in line with sector.
