SGGEF - Sage Group: Overpriced For A Mature Business With Weakened Profitability (Rating Downgrade)

2024-03-20 12:34:46 ET

Summary

• Sage's business continues to perform well at the top line, but its profitability is a concern.
• The company's outlook lacks specificity on future profitability, raising doubts about its ability to improve profit margins.
• The shares are now overvalued, trading at a high price-to-earnings ratio of 60, making a "strong sell" rating appropriate.

Business accounting software group The Sage Group ( SGGEF ) has a lot to like about it – and I do. I think it has a long runway for growth thanks to being in a field with ongoing strong demand and having an installed customer base trained on and used to its product. However, I think the share price has got far ahead of itself....

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