Integrated Research hits all-time high after outperforming Bell Potter’s first half profit forecasts

By Trevor Hoey. Published at Jan 19, 2017, in Features

Integrated Research (ASX: IRI), a provider of performance management software across IT infrastructure, payments and communications business segments has provided upbeat profit guidance for the first half of fiscal 2017.

Management said it anticipates profit after tax to be between $7.2 million and $8 million for the six months to December 31, 2016, struck on revenues of between $42.3 million and $44 million.

While analysts at Bell Potter were forecasting revenues in line with Integrated Research’s update, the broker was forecasting a net profit of $7 million.

Integrated Research’s higher than expected profit guidance could account for Wednesday’s 8% surge in the company’s share price.

Based on the bottom end of management’s guidance this represented year-on-year profit growth of approximately 16%.

Looking across possible revenue drivers, it would appear that the increase in license sales from $19.5 million in the six months to December 31, 2015 to a range between $22.5 million and $24.2 million in the first half of fiscal 2017 has had an impact.

The fact that Integrated Research generates a high level of recurring revenue through its license and maintenance fees is one of the reasons why Bell Potter rates the stock highly.

The broker noted in December that license fees and maintenance fees accounted for 54% and 32% of revenue respectively.

The broker has a buy recommendation on the stock with a 12 month price target of $3.50, representing a premium to Wednesday afternoon’s all-time high of $2.94.

It should be noted that broker projections and price targets are only estimates and may not be met. Also, historical data in terms of earnings performance and/or share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.

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