The stock market doesn’t get everything right. Sometimes, investors can mistake short-term difficulties for permanent problems.
Shares in software company Craneware (LSE:CRW) are down 51% since the start of the year, including a 26% decline in a day last Friday (3 July). So is this one worth checking out?
Is the sky falling?
The damage was caused by a full-year trading update. Revenue and adjusted EBITDA for FY26 will be “broadly in line” with FY25 — which sounds fine, but it means the firm isn’t growing.
| Measure | FY25 actual | FY26 guidance (midpoint) | Change |
|---|---|---|---|
| Revenue | $205.7m | $206.5m | +0.4% |
| Adjusted EBITDA | $65.3m | $66.0m | +1.1% |
For a stock trading at a price-to-earnings (P/E) ratio of around 26, that’s not really good enough. And the issue is coming from the drug discount programme in the US.
Craneware helps hospitals identify opportunities in a scheme known as 340B. This requires manufacturers to sell drugs at discounts under programmes such as Medicaid.
Pharmaceutical companies, however, have tightened restrictions on discounted medicines. And that means hospitals aren’t getting their drugs as quickly.
Craneware recognises revenues when the hospital receives the drugs, not when it identifies the opportunity. That means some of the sales it had expected this year have been delayed.
A handful of other large enterprise contracts have also slipped into FY27. Taken together, that means this year’s anticipated growth hasn’t materialised – yet.
CEO Keith Neilson said: “Naturally we are disappointed not to have delivered the growth that we expected in FY26. While the short-term complexity in the pharmacy market has impacted the year, the long-term opportunity remains intact.”
The last five words are the important ones.
Long-term value
Craneware’s shares are now 59% below the level at which the board rejected a takeover bid in 2025. And they’re trading at historically low multiples.
That might be justified if something has fundamentally changed within the business in the last couple of years. But has it?
The firm sells software that helps US hospitals get paid properly. Its Trisus platform handles pricing and revenue integrity, and its chargemaster product is used by a lot of US hospitals.
Its strengths are the kind that survive a bad year. They include recurring revenues, net revenue retention of 103%, 32% EBITDA margins, and strong cash generation.
The dividend has also grown for 18 consecutive years. Management also flagged roughly $500m of outstanding 340B qualifying drug purchases still waiting to convert.
The long-term threat is the obvious one. A lot of revenue depends on a US government drug discount scheme that pharmaceutical companies are actively working to shrink.
In theory, Washington could reform this at any time. And it makes the upcoming mid-term elections important for the company.
Management calls the shortfall a timing issue. If manufacturer restrictions become permanent, it’ll turn into a structural one.
The investment decision
So, what investors have is a high-margin, cash-generative software business at its cheapest rating in a decade. That’s exactly the sort of situation that’s worth investigating.
The big question is whether 340B revenue from US hospitals is delayed or disappearing. I think it’s hard to tell, but the stock is one to keep a close eye on.
Right now, the stock market seems undecided. If the share price falls any further, investors might wonder whether there’s a big enough margin of safety on offer.
Should you invest £5,000 in Craneware Plc right now?
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Stephen Wright does not own shares in any of the companies mentioned.
