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Red tape software play confident of further growth


Gain to date: 20.4%

Original entry point: Buy at 122.5p, 17 May 2018

Compliance and safety rules software supplier Ideagen (IDEA:AIM) appears to be striking while the iron is hot, swooping on its second US acquisition in six months. This makes sense since North America represents one of the best, if not the best, growth market for it right now.

The $5m deal (plus up to $2m extra in deferred performance payments) of InspectionXpert bolsters its exposure in the aerospace industry, one of its core target markets. That roughly 95% of InspectionXpert’s revenues are of a recurring nature underlines Ideagen’s eye for an opportunity.

The news builds on very decent full year results announced in July showing acquisition-boosted pre-tax profits up 40% at £9.7m, and organic revenue growth of 11%.

Re-jigged forecasts now call for £11.4m of pre-tax profit this year to 30 April 2019, and £12.9m in the following 12 months, implying a 2020 price-to-earnings multiple of 27.2.

Disappointment-free execution of the business plan, to us, justifies this premium rating. And remember, management have their own 200p internal share price target, and we would not bet against such optimism.

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