TNE: Smashing goals

In August last year I wrote an article about TechnologyOne (ASX:TNE) titled “Doubling in size every five years”. It concluded with the following observation and question. “Whilst revenue might double in 5 years to circa $800 million, can the market capitalization hit $10 billion in the same period. Ultimately it is the answer to the second question that will determine the return on investment for shareholders.”

16 months later the revenue target is well on track having surpassed $500 million in the financial year ended 30 September 2024. As for the question about market capitalization, mission accomplished. The market cap is now $10.17 billion and anyone who invested at that time and held, would have doubled their money.

The prior article also noted “They are aiming for annual recurring revenue (ARR) of $500 million by FY26.” As it turned out, that was too modest a goal as noted in the slide below from their FY24 results presentation. ARR has already reached $470 million rising 20% in FY24 and they have brought forward the $500m target to the first half of FY25.

ARR Target

Source: TNE, Full Year Results, 19/11/24

They have also set a new long term goal of $1 billion ARR by FY30 which is consistent with their objective to double in size every five years.

The FY24 results which were released on 19 November, were very strong and the share price jumped 10% on the day and has continued to rise. Revenue rose 17% driven by SaaS and recurring revenue. EPS rose 14% and dividends increased 15%. The push into the UK is gaining momentum with ARR up 31%.

When I wrote the article last year, TNE qualified for the Quality Compounder screen as presented by Stockopedia contributor Roland Head in his article Building a screen to find Compounding Quality stocks. It still does. The table below compares the position then and now. Most measures have shown small improvements.

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