Technology One (TNE) $30.45

Enterprise software solutions company TNE received upgrades and downgrades from analysts after beating earnings guidance in late 2024; broker consensus on TNE  is now neutral. The numbers were great, but when a stock is trading on ~70x forecasted earnings, they are often not good enough:

• Total annual recurring revenue (ARR) soared 20% to $470.2mn, with the company evolving well in the UK.
• Total revenue increased 17% to $515.4 million, while revenue from SaaS and recurring business rose 19%.

This is an excellent business with recurring revenue that attracts many investors. However, it’s rich from a valuation perspective, and we don’t like the risk/reward ~$30, even though it looks destined to make fresh highs above $32.

• TNE is trading significantly above its average valuation over recent years.

We believe that TNE can achieve its goal of $1bn annual reoccurring revenue by FY30, but much of this is already built into the share price, and we believe it’s another case of “buy the dip”.

• Its hard to know what TNE is worth given their incredible execution in recent times, but if we price it off its own history, ~$25 is the level.