Data#3 (ASX:DTL) have grown their gross revenue at a compound annual growth rate of 17% for the last five years, meaning it has more than doubled from $1.2 billion to $2.7 billion for the last 12 months. It is forecast to reach $3.1 billion by 2025. This has been achieved without needing to issue new shares to fund acquisitions. In other words, it is organic growth.
Data#3 provide IT services to corporate and public sector customers. They work across a broad range of clients to provide IT infrastructure such as cloud solutions, cyber security, data and analytics and connectivity through projects and ongoing support.
One of their competitive advantages is their strong partnerships with leading global IT equipment and software suppliers. They are the number one partner in Australia for Microsoft, Cisco and HP and a top five partner for Dell.
They were founded in 1977 and listed in 1997. They are a picture of longevity and stability. The previous CEO retired in March, after 30 years with the company, nine of those as CEO. His successor, Brad Colledge joined the company in 1995, so is also a veteran of almost 30 years.
The shareholder register is well spread with a wide range of institutional and other holders and no single entity holds more than 5% of the shares on issue.
DTL was selected for the inaugural ANZ NAPS portfolio established in January 2023 as one the two highest ranked technology stocks. When the portfolio was rebalanced at the beginning of 2024 it retained its position with a StockRank of 94. Since inception it has produced a total return of 19.2%p.a..
The biggest driver of its StockRank is the Quality score of 97. The returns on capital and equity are very high, in the 60s. This is a very capital light business with no need to invest large amounts in property, plants and equipment. Their main investment is in their people, but that does not appear on the balance sheet.
Their balance sheet is very strong. They have no financial debt and at the end of December they had $117million in cash. The biggest asset by far is receivables at $200m, but this is offset by payables of $235m. Receivables and payables are high at financial year end, but this reflects…
