Does MM like ELMO Software (EMO) here?

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Question asked 06/08/2022

Does MM like ELMO Software (EMO) here?

Thanks for taking my question! Best regards, The share price of ELO has dropped from the year high of $5.70 to the current price of $2.43. Highlights from the last Q3 Quarter Business Update include confirmation that Elmo Software is heading for the top end of Full Year guidance amid stable cost growth. Annual recurring revenue in the third quarter grew 33% and surpassed the $100m milestone. ELMO also announced Positive EBITA in both H1 FY22 Results and Q3 Business Update: H1 FY22 EBITA of positive $0.3 million up $0.9 million from negative $0.6 million and, Q3 Business Update of positive EBITA @2.0 million, up $3.2 million from negative $1,2 million. Is this the right time to nibble at ELMO Software? Thanks!!!

Answer

Hi Peter,

Software service provider ELMO Software (ELO) is a $244m software service provider whose numbers look to be improving but the markets clearly not convinced as the stocks struggling to regain half of this years losses, let along the drop since early 2020.

As we’ve seen over the last week with the BNPL space when these out favour stocks bounce it can be hard and sharp but picking exactly how far they will ultimately fall is more guess work than science but it does look like ELO is looking for a low. Our analyst at Shaw Jules Cooper who covers Elmo has it as one of his top picks and had this to say following the update you refer to: We reiterate our Buy rating and PT $7.60/sh. ELO continues to represent good value trading on an FY22 EV/Revenue multiple of 2.8x vs US peers such as Paycom (PAYC-US) and Paycor (PYCR-US) trading on multiples of 14.6x (Dec-22) and 10.1x (Jun-22) respectively.

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ELMO Software (ELO)

LAST UPDATED 06/08/2022 08:59

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