Sage Group (SGPYY) AI Stock Analysis

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Sage Group

(OTC:SGPYY)

73Outperform

Sage Group demonstrates strong financial performance and a positive outlook from the latest earnings call, driven by significant revenue and profit growth, and strategic product innovation. However, the technical analysis indicates a bearish trend, and the valuation suggests the stock may be overvalued, which could limit upside potential. These mixed signals result in a moderate overall score.

Sage Group (SGPYY) vs. S&P 500 (SPY)

Market Cap

$16.25B

Dividend Yield1.35%

Average Volume (3M)8.56K

Price to Earnings (P/E)41.8

Beta (1Y)0.73

Revenue Growth10.37%

EPS Growth60.13%

CountryUS

Employees10,740

SectorTechnology

Sector Strength65

IndustrySoftware - Application

Share Statistics

EPS (TTM)1.06

Shares Outstanding244,831,310

10 Day Avg. Volume0

30 Day Avg. Volume8,558

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.00

Price to Cash Flow (P/CF)0.00

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price TargetN/A

Price Target UpsideN/A

Rating ConsensusN/A

Number of Analyst Covering0

Sage Group Business Overview & Revenue Model

Company DescriptionSage Group plc is a prominent British multinational enterprise software company headquartered in Newcastle upon Tyne, England. It specializes in providing business management software and services, primarily targeting small to medium-sized enterprises (SMEs). Sage's core offerings include accounting, enterprise resource planning (ERP), payroll, human resource management, and payment processing solutions. With a strong global presence, the company operates in various sectors, including finance, retail, manufacturing, and professional services, delivering solutions that help businesses streamline operations and drive growth.

How the Company Makes MoneySage Group generates revenue primarily through the sale of its software solutions and related services. The company employs a subscription-based model, where customers pay recurring fees for access to its cloud-based and on-premises software products. Key revenue streams include software licensing, maintenance, and support services. Additionally, Sage offers value-added services such as consulting, training, and implementation support, which contribute to its earnings. Strategic partnerships with technology providers and resellers also play a significant role in expanding Sage's market reach and enhancing its product offerings, further bolstering its revenue.

Sage Group Financial Statement Overview

Summary

Sage Group exhibits a strong financial profile with consistent revenue growth, high profitability margins, and robust cash flow generation. While the company maintains healthy leverage levels, the relatively lower equity ratio indicates a dependency on debt which should be monitored. Overall, the company's financials suggest it is well-positioned for sustainable growth, with potential risks mitigated by strong operational performance.

Income Statement

Very Positive

The company shows a strong financial performance with increasing revenue and improved profitability. The Gross Profit Margin is high at 92.82%, indicating effective cost management. A healthy Net Profit Margin of 13.85% and a Revenue Growth Rate of 6.77% from the previous year highlight the company's growth trajectory. The EBIT and EBITDA Margins are robust at 19.38% and 24.22%, respectively, showcasing operational efficiency.

Balance Sheet

Positive

The balance sheet reflects a solid financial position with a Debt-to-Equity Ratio of 1.14, indicating manageable leverage. The Return on Equity is strong at 29.56%, reflecting good returns on shareholders' investments. However, the Equity Ratio of 30.05% suggests a moderate reliance on debt financing, which could pose a risk if not managed carefully.

Cash Flow

Very Positive

The cash flow statement indicates strong cash generation, with a significant Free Cash Flow Growth Rate of 24.38%. The Operating Cash Flow to Net Income Ratio is excellent at 1.52, suggesting efficient cash conversion from earnings. The Free Cash Flow to Net Income Ratio is also solid at 1.41, underscoring the company's ability to generate free cash flow relative to net income.

Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Breakdown
Income Statement		Total Revenue
2.33B	2.18B	1.95B	1.85B	1.90B
	Gross Profit
2.16B	2.03B	1.81B	1.72B	1.78B
	EBIT
452.00M	315.00M	367.00M	373.00M	404.00M
	EBITDA
565.00M	456.00M	464.00M	458.00M	538.00M
	Net Income Common Stockholders
323.00M	211.00M	260.00M	285.00M	310.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
508.00M	696.00M	489.00M	553.00M	831.00M
	Total Assets
3.64B	3.94B	3.90B	3.33B	3.71B
	Total Debt
1.25B	1.26B	1.22B	814.00M	990.00M
	Net Debt
738.00M	561.00M	733.00M	261.00M	159.00M
	Total Liabilities
2.54B	2.53B	2.50B	2.22B	2.06B
	Stockholders Equity
1.09B	1.41B	1.40B	1.11B	1.65B
Cash Flow		Free Cash Flow
454.00M	365.00M	233.00M	320.00M	366.00M
	Operating Cash Flow
491.00M	387.00M	285.00M	376.00M	406.00M
	Investing Cash Flow
-41.00M	-36.00M	-284.00M	62.00M	179.00M
	Financing Cash Flow
-610.00M	-114.00M	-127.00M	-694.00M	-88.00M

Sage Group Technical Analysis

Technical Analysis Sentiment

Positive

Last Price67.35

Price Trends

50DMA

62.73

Positive

100DMA

63.89

Positive

200DMA

59.06

Positive

Market Momentum

MACD

1.38

Negative

RSI

69.87

Neutral

STOCH

99.50

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SGPYY, the sentiment is Positive. The current price of 67.35 is above the 20-day moving average (MA) of 62.51, above the 50-day MA of 62.73, and above the 200-day MA of 59.06, indicating a bullish trend. The MACD of 1.38 indicates Negative momentum. The RSI at 69.87 is Neutral, neither overbought nor oversold. The STOCH value of 99.50 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for SGPYY.

Sage Group Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PAYC	80 Outperform	$13.18B	25.49	34.88%	0.66%	11.19%	51.03%
BSY	80 Outperform	$13.25B	60.58	25.21%	0.57%	10.71%	-27.63%
PCTY	78 Outperform	$10.33B	46.62	19.70%	―	14.63%	17.15%
SSNC	75 Outperform	$19.23B	24.31	12.34%	1.27%	6.92%	28.43%
SGPYY	73 Outperform	$16.25B	41.75	25.73%	1.35%	10.37%	60.13%
MANH	71 Outperform	$11.14B	52.45	89.60%	―	9.18%	14.35%
Sector *	60 Neutral	$10.77B	10.41	-6.71%	2.99%	7.69%	-13.12%

* Technology Sector Average

Performance Comparison

SGPYY

Sage Group

67.47

8.04

13.53%

MANH

Manhattan Associates

186.86

-30.37

-13.98%

SSNC

SS&C Technologies Holdings

77.71

15.13

24.18%

PAYC

Paycom

249.35

77.13

44.79%

PCTY

Paylocity

193.54

29.75

18.16%

BSY

Bentley Systems

47.06

-7.66

-14.00%

Sage Group Earnings Call Summary

Earnings Call Date:Nov 20, 2024

(Q4-2024)

% Change Since: 24.63%|

Next Earnings Date:May 15, 2025

Earnings Call Sentiment Positive

The earnings call reflects a strong financial performance with significant growth in revenue, ARR, and operating profit. The introduction of new products and strong regional performance further support the positive outlook. Although there were minor challenges in renewal rates and North America, these did not significantly impact the overall positive trajectory of the company.

Q4-2024 Updates

Positive Updates

Strong Revenue and ARR Growth

The company achieved revenue growth of 9% and ARR growth of 11%, with ARR increasing by almost GBP230 million to GBP2.3 billion. This growth is well-balanced between new and existing customers.

Record Operating Profit and Margin Expansion

Operating profit grew by 21% to GBP529 million, with a margin expansion of 220 basis points to 22.7%. This represents a record operating profit for Sage.

High Cash Conversion and Free Cash Flow

The company delivered excellent cash conversion of 123% and free cash flow of GBP524 million, up 30% on the prior year.

Cloud Products and Sage Intacct Growth

Sage Business Cloud revenue increased by 16%, with cloud-native revenue growing by 23%. Sage Intacct also showed significant growth, particularly in the UK with a two-thirds increase.

Introduction and Adoption of Sage Copilot

The company introduced Sage Copilot, a Gen AI-powered digital assistant, which has seen strong engagement and adoption.

Strong Regional Performance

North America, UKIA, Africa and APAC, and Europe all showed revenue growth, with notable achievements in cloud solutions across these regions.

Share Buyback Program

The company announced a share buyback program of up to GBP400 million, reflecting strong cash generation and financial position.

Negative Updates

Slight Decline in Renewal Rate

Renewal rate by value was 101%, slightly down from the previous year's 102% due to softer cross-sell and upsell in North America.

Challenges in North America

There were challenges in North America with CFOs taking longer to make investment decisions, impacting cross-sell and upsell activities.

Decrease in Other Revenue

Other revenue declined by 11% for the full year, although this was in line with strategic expectations.

Company Guidance

The guidance provided in Sage's FY '24 call highlights robust growth and strong financial performance. The company reported a 9% revenue increase and an 11% ARR growth, marking their third consecutive year of double-digit ARR expansion. Operating profit hit a record GBP529 million, with a margin expansion of 220 basis points, bringing the margin to 22.7%. The renewal rate by value stood at 101%, indicating solid retention and upsell rates. Sage also achieved a cash conversion rate of 123%, contributing to a 30% increase in free cash flow to GBP524 million. The company expects total revenue growth of 9% or above in FY '25, with operating margins projected to continue their upward trend. Sage's strategic focus remains on investing in product innovation, notably integrating their Sage Copilot AI assistant, and scaling their platform to drive sustainable growth.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.