The Integrated Research Limited (ASX: IRI) is down almost 14% today after reporting its full-year FY20 results.
After reporting a 10% increase in both revenue and profit, investors may be asking themselves why the IRI share price has decreased. Before we dig into the results, here’s a primer on the business.
What does Integrated Research do?
Integrated Research describes itself as the leading global provider of proactive performance management software for critical infrastructure, payments and communication ecosystems.
IRI’s flagship product is Prognosis, which helps IT teams manage security and network bandwidth for communications, payments and information flow.
Integrated Research has been operating since 1988 and now has over 1,000 organisations as clients across more than 60 countries – some of them Fortune 500 businesses. In fact, Integrated Research says it has more than 25% of the Fortune 500 as customers.
IRI’s FY20 results
Some key highlights from Integrated Research’s results are below:
- Revenue of $110.9 million (an increase of 10% compared to FY19)
- Net profit after tax of $24.1 million (a rise of 10% compared to FY19)
- Operating cash flow of $24.2 million (up 5% on a like for like basis adjusting for new AASB leasing standards)
- Return on equity 29% (down two percentage points from FY19)
- Net profit after tax margin of 22% (identical to FY19).
- Dividends per share for FY20 were 7.25 cents (consistent with FY19)
Integrated Research reports that new business growth and cash receipts have slowed in Q4 FY20 due to COVID-19.
The company announced earnings per share (EPS) of 14.0 cents – an increase of 10% compared to the prior year. This result gives Integrated Research a 16% ten-year compound annual growth rate (CAGR) for EPS.
Depsite the large drop in share price after reporting today, Integrated Research is currently sitting at $4.21 per share – a significant rebound from the decline to $2.19 during the March sell-off. The FY20 dividend payout represents a 1.72% yield on the current share price.
Chairman commentary on the FY20 results
Paul Branding, Chair of Integrated Research, said, “IR has again delivered strong financial results for 2020 in a tumultuous global environment. Our solutions have become even more relevant to enterprise customers, and we believe the structural changes in market dynamics are an opportunity for the Company. We continue to invest in research and development to accelerate innovation and expand IR’s value proposition for customers across the globe.”
Integrated Research has not provided forward guidance to the market due to unprecedented global volatility and the unpredictable nature of the pandemic.
Are Integrated Research shares a buy?
Integrated Research shares are currently trading on a price-to-earnings (PE) ratio of around 33x. This ratio could be viewed as reasonable for a software company paying a dividend. And it may be appealing to some investors. However, I prefer software companies growing at a faster rate like Pushpay Holdings Ltd (ASX: PPH), for example.
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