‘Sticky’ revenues

In terms of the underlying figures, total revenue rose 4.9% compared to the equivalent period the year before. Within that figure, recurring revenue increased by 9.9%. A big part of the appeal for me with operations at Sage is that the product is ‘sticky’. When customer firms and organisations embed the Sage system into their business, switching costs and inconvenience are high, so many continue with Sage rather than face all the hassle of changing to another supplier. I think that situation makes cash flows steady and predictable for Sage and the firm has many defensive characteristics that will likely keep the dividend growing in the years to come.

Indeed, the dividend has risen around 46% over the past five years, and at today’s share price close to 728p, the yield is running close to 2.3%. That’s not high, but I think it remains attractive because it’s growing. The price-to-earnings ratio for the current trading year stands at about 24, which shows that the valuation is quite lofty. But I think Sage is a quality outfit that deserves a higher rating and I don’t expect the valuation to slide any time soon, as long as growth remains on track.

The directors expressed their own satisfaction with today’s figures, and confidence in the outlook, by pushing up the interim dividend by 2.5%. Chief executive Steve Hare said in the report that the company experienced a “strong start” to 2019. He confirmed that Sage aims to become a great Software-as-a-Service (Saas) company and the focus is on “driving high-quality recurring and subscription revenue” during the second half of the year, which implies sales online.

Migration to the cloud

Things have moved on with the firm’s offering in recent years and now Sage claims to be “the global market leader” for technology designed to help businesses “of all sizes” manage “everything from money to people.” Much of the business is facilitated by Sage Business Cloud, which the company snappily describes as “the one and only business management solution that customers will ever need.” Putting aside for the moment all the marketing puff, I think the concept of getting customers to be dependent on the Sage product and service has a lot of merit.

The outlook is positive and I can see nothing in the report that indicates revenues, profits and the dividend will falter. I expect we could see modest annualised increases for years to come and would be happy to park some of my money in the shares.

The post I’d hold tight to this FTSE 100 stock that keeps on delivering appeared first on The Twelfth Magpie.

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• Down 33%, is there a once-in-a-decade chance to buy this quality FTSE 100 stock?

Kevin Godbold has no position in any share mentioned. The Motley Fool UK has recommended Sage Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The software giant is a share that I’ve long been tipping to jump in value following earlier heavier weakness in 2018. So naturally I’m pleased that the business has continued its share price ascent late last year and hit five-month peaks in the wake of its first-quarter trading statement being released last week.

Sage advised that organic revenues had pumped 7.6% higher between October and December, to £465m, the top line picking up momentum following the 6.8% rise it had reported in the fiscal year to September. It was possible that disappointing licence numbers could have delivered a hammer blow to investor sentiment over the past few months, but reassuring updates in this period have suggested that the firm has finally turned the corner following the disastrous profit warnings of last year.

Big in America

The accountancy specialist’s move to a subscription-based product model is showing tangible signs of paying off. Indeed, sales are really beginning to click through the gears in its key North American territory, where organic revenues rose by double-digit percentages (10.4% in the last fiscal quarter).

It stands to reason that City analysts expect Sage to keep its long-running record of earnings growth running — a 9% rise is forecast for fiscal 2019 — and therefore for dividends to keep rising as well. Last year’s total payout of 16.5p per share is predicted to rise to 17.8p in the present period, allowing investors to enjoy an inflation-mashing 2.9% yield.

Another Brexit-proof pick

Now Sage isn’t exactly cheap, the firm’s forward P/E ratio of 17.9 times sitting outside the widely-considered value benchmark of 15 times and below.

I would consider this a fair price given the huge promise of its subscription-based services across the globe, and I would argue that the same theory applies to DCC (LSE: DCC) which deals on a corresponding P/E multiple of 18.1 times.

A tad toppy on paper, sure, but the rate at which the business, which provides sales and marketing services to the energy, technology and healthcare segments across the globe, has reliably grown profits for many years now makes it worthy of this slight premium in my book. And particularly so in view of most recent financials which showed adjusted operating profit rise 15.9% in the six months to September, to £141.9m, a result that encouraged it to hike the mid-term dividend 10% to 44.98p per share.

For the full year to March 2019, City analysts are predicting a 136p total reward, up from the 122.98p shelled out last year and supported by a 13% earnings rise. A subsequent 2.1% dividend yield may not be the biggest, but for those seeking dividend increases year after year DCC (which has raised annual dividends relentlessly for a quarter of a century) is an unmissable pick today, and particularly given the Brexit-sized shadow threatening profits across much of the FTSE 100.

The post To the Brexit lifeboats! 2 FTSE 100 dividend stocks I think could protect your wealth appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Sage Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

There’s signs though that the FTSE 100 could be about to turn significantly higher. After the profit warnings of previous months Sage finally delivered the goods with a robust full-year release in late November, an update that has helped its share price recover some ground whilst the rest of the Footsie has sunk in patchy pre-Christmas trades.

On the mend

I warned before that last month’s update could have broken Sage again should fourth-quarter licences have disappointed. Fortunately that wasn’t the case and consequently the business was more-or-less able to meet its organic revenue growth for the 12 months to September with a 6.8% advance to £1.82bn, just short of its targeted 7% rise.

Pessimists may be shouting that the planned sale of Sage Payroll Solutions helped lift this figure — it would have been 6.6% otherwise. I’m a glass-half-full man right now, however, and am more interested in the strong sales momentum that the company is enjoying.

Indeed, Sage put its nightmare first half behind it and reported that organic turnover hit its 7% growth goal during the April to September period. This sales step-up was thanks to a “renewed focus on high-quality subscription and recurring revenue,” and performance was even better for August and September as sales rose above 7%, giving the business brilliant upward trajectory into fiscal 2019.

Competition is tough but I’m confident that by stepping up its drive into the ‘software-as-a-service’ segment that the Footsie firm can deliver spectacular returns in the years ahead. Indeed, chief executive Steve Hare last month announced plans to accelerate investment in SaaS to boost long-term sales and bring it more into line with the R&D spend of its rivals and for the current year it will spend an extra £60m.

Dividend darling

That improving sales performance into fiscal 2019 saw Sage keep its ultra-progressive dividend policy on track, and it raised the full-year dividend for last year 7% year-on-year to 16.5p per share. And shareholders can expect the business to keep raising dividends, in my opinion.

City analysts currently expect earnings to dip 6% in the year to September 2019, but I can see this figure being upgraded given the strong revenues progression of recent months. Even if it isn’t, though, Sage still has the financial strength to keep raising the dividends even in times of temporary earnings pressure. Put simply, the software star is a cash machine and free cash flow improved to £356m last year from £276m the year before that, and this helped net debt-to-EBITDA improve to 1.2 times versus 1.6 times previously.

The number crunchers agree with me and they’re predicting a 16.9p per share payout for fiscal 2019, meaning investors can enjoy an inflation-beating 2.9% yield. Now Sage may be a bit expensive on paper because of its forward P/E ratio of 19.3 times. But given the possibility that its share price could fly in 2019 I reckon this is a small price to pay. All things considered it’s a top buy, in my opinion. 

The post Have £3k to spend? I think this FTSE 100 dividend growth stock is a top pick for 2019 appeared first on The Twelfth Magpie.

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• Down 33%, is there a once-in-a-decade chance to buy this quality FTSE 100 stock?

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Sage Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

IAG (LSE: IAG) was still sinking on Tuesday as the fallout of the recently-announced data breach continued.

The British Airways and Iberia owner was hit by cyber criminals at the start of September and the credit card details, names and addresses of some 380,000 people snatched. Investors are concerned over what financial penalties IAG could face following the latest failure in its online systems, with many commentators suggesting a fine running into the hundreds of millions of pounds.

It’s a concern, naturally, but I would consider the five-month dip in IAG’s share price to be a great buying opportunity. Its increasing exposure to the booming low-cost travel market in particular makes it a terrific selection in the years to come, and in the more immediate term, City analysts are forecasting earnings growth of 9% and 4% in 2018 and 2019 respectively.

It’s also no surprise to see the number crunchers anticipating further dividend growth too. Last year’s payout of 27 euro cents per share is set to rise to 29 cents this year and again to 32 cents in 2019, figures that yield 4.1% and 4.5%.

This recent share price weakness leaves IAG dealing on a forward P/E ratio of 6.2 times. It’s a rating that’s far too cheap in my opinion, particularly given the prospect that booming dividend expansion can continue long into the future.

In recovery mode?

The Sage Group (LSE: SGE)  has experienced some share price pressure in recent times as well, down 28% since the turn of 2018 and currently languishing around levels not seen since the beginning of 2016.

Unlike IAG, though, the accounting software colossus does not carry the same classic value characteristics of its Footsie rival. Its prospective P/E multiple of 16.2 times sits a long way ahead of the widely-considered bargain benchmark of 10 (and under) where IAG resides.

Sage’s multiple still suggests to me that investors are getting plenty of bang for their buck. As has been mentioned before, the impact of successive profit warnings this year, allied with uncertainty over the direction of the firm amid the decision to jettison chief executive Stephen Kelly more recently, has smashed Sage’s appeal as a safe-as-houses stock selection.

There’s no guarantee that the business won’t suffer more trouble should it announce that it had failed to secure the strong Q4 licences it has been tipping when it declares results for the 12 months to September on November 21.

But City brokers are anticipating that Sage will hit its fourth-quarter target, and that it can continue to build on the solid momentum of recent months. This is illustrated by analysts forecasting an 8% profits rise in fiscal 2019, suggesting that Sage can keep its long-running profits growth story intact. And they are predicting that dividends should keep rising as well.

A 16.5p per share dividend is anticipated for the year just passed, up from 15.42p in the previous period, and a rise to 17.8p is predicted for the new period. This yields 3.1%. While rising competition is also causing some concern over profits growth at Sage, I am convinced that the business has all the tools to keep delivering solid profits and dividend expansion in the years ahead.

The post Create a second income stream with these 2 FTSE 100 dividend growth stocks appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Sage Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I’ve always kept the faith, however, arguing that Sage’s decision to switch to a subscription-based model should lay the foundation for handsome earnings growth in the years ahead. And my confidence has been bolstered by the company’s much-improved trading statement of recent sessions.

In the period spanning April-June, group organic revenues had risen to 6.8%, speeding up from average growth of 6.3% in the prior six months.

Investors reacted badly to news in the spring that the FTSE 100 firm was downgrading its organic sales guidance for the full year ending September 2018 to 7% from 8%, but signs of improving trading in France and the UK, and continued robustness in its North American marketplace, mean that the company can now start looking up again instead of down.

More dividend growth expected

The latest release vindicated City analysts’ forecasts that Sage should report earnings growth of 9% in both fiscal 2018 and 2019. This means that the software star is also in great shape to keep lifting its dividends.

The Square Mile is anticipating that last year’s 15.42p per share reward will shuffle to 16.7p in the present period and again to 17.9p next year.

Now subsequent yields of 2.5% and 2.7% may be solid rather than spectacular, but the chances of profits and payouts continuing to sprint higher long after this period convince me that it could help many an investor to retire early. This makes Sage more than worthy of its elevated premium, in my opinion, a forward P/E ratio of 20.1 times.

Chemical high

Share pickers scouring the Footsie for classically-considered value stocks — that is, companies with prospective P/E multiples of 15 times or below — may also be minded to give Croda International (LSE: CRDA) a wide berth on account of its own princely valuation, in this case a multiple of 27.2 times.

As in the case of Sage, however, I reckon long-term investors need to look past this heady reading and consider the exceptional sales progress the chemicals company is making. Organic sales across its core business swept 4.7% higher between January and June, suggesting that such turnover jumped 5.4% in the second quarter versus 4% in the prior three-month period.

City brokers are expecting earnings to fire 6% higher in 2018 and 8% higher next year, stable figures that keep hopes of further dividend progression very much alive. 2016’s reward of 81p per share is predicted to move to 88p this year and again to 97.4p in 2019.

Investors should not dwell on marginal yields of 1.7% and 1.9% for these years but instead at the rate Croda is likely to continue raising dividends as demand for its chemicals takes off.

The post Have £1,000 to invest? These 2 FTSE 100 dividend growth stocks could help you to retire early appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Sage Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Halma (LSE: HLMA) has already proven its mettle as a go-to growth stock, the business churning out solid profits expansion for years now and, more recently, its bottom line growing by double-digit percentages.

The City is expecting the business, which provides hazard detection and life protection products, to report an 8% advance for the year to March 2018 when it releases trading details on June 12. And further chunky jumps, of 10% and 6%, are slated for fiscal 2019 and 2020 respectively.

Now Halma may be expensive, the FTSE 100 firm currently carrying a forward P/E ratio of 27.5 times. But in my opinion its brilliant long-term profits outlook merits such a premium.

On the charge

You see, in its latest trading update Halma underlined its exceptional defensive characteristics that keep on driving the bottom line whatever the weather. Back in March it advised that “order intake has remained ahead of revenue” during the last fiscal year, the company benefitting from “the diversity of its markets and resilient growth drivers.”

Halma has its fingers in many pies, allowing it to keep growing sales even if one of two of its end sectors encounter some turbulence. Its excellent geographical wingspan is another reason that it remains so resilient. As well as lauding the “good progress” it has made in the UK, US and continental Europe in the last fiscal period, it also reported “strong performance” in the hot growth regions of Asia Pacific.

As my Foolish colleague Roland Head pointed out late last year, Halma has worked hard to improve its market position across the world through its busy M&A drive. Over the past decade it has spent close to £750m on more than 30 businesses and its formidable cash generation means that such earnings-boosting measures is likely to continue with gusto.

Adjusted operating cash flow jumped 13% year-on-year during April-September to £83.7bn, and the company advised in March that its strong balance sheet means that “we continue to identify potential acquisition opportunities in all four of our sectors.”

Revenues about to rebound?

Halma is clearly a great selection for growth seekers scouring the Footsie index. But it isn’t the only one, and The Sage Group (LSE: SGE) is another blue-chip worthy of serious attention.

Sage, like the safety equipment specialist, has churned out reliable profits expansion for many years now. And the Square Mile’s army of boffins are predicting additional rises of 9% in both the years to September 2018 and 2019.

It may also be expensive on paper, the financial software giant sporting a forward P/E multiple of 20.4 times. But its exciting growth measures still make it an attractive buy, in my opinion.

Recurring revenues growth has disappointed more recently and caused the company to downgrade its full-year sales expectations back in April. Sales rose 6.4% in the first half versus 11.1% a year earlier, Sage advised in May’s subsequent trading statement.

However, the tech giant also advised this month that “the root causes of execution issues have been identified and management has already made changes,” and that it expects sales to accelerate from the second half and beyond. There was always going to be some trouble emanating from its switch to its subscription-based model, and I remain convinced that this move should still deliver excellent profits growth in the years ahead.

The post 2 FTSE 100 growth stocks I’d buy and hold for 25 years appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Halma and Sage Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

It’s the second disappointing update this year from the firm. Investors rushing for the exit have now pushed the Sage share price down by nearly 30% from January’s high of 825p.

What’s gone wrong?

In January Sage blamed its French business for a slow start to the year. Today the company said that “inconsistent operational execution” meant that organic revenue growth was “below management’s expectations” during the six months to 31 March.

Organic revenue growth, which excludes acquisitions, is now expected to be 7% this year, rather than 8% as previously guided.

Sage is trying to shift its customers onto a subscription-based model that generates recurring revenue. Unfortunately some customers appear reluctant to make the shift. Today’s figures show that recurring revenue grew by just 6.4% during the first half of this year, compared to 11.1% during the same period last year.

A good business at the wrong price?

One attraction of this business is that many customers pay up front for their services. This means that cash generation is quite strong.

Profit margins are also high — Sage had an operating margin of 20% last year.

Overall, I believe this business could be a good income investment. But adjusted earnings are only expected to grow by 1.2% this year and by 9.6% in 2018/19. And today’s news makes me think that even these forecasts could be in doubt.

Despite the risks, Sage stock still trades on a forecast P/E of 17 with a prospective yield of 2.9%. That’s too expensive for me. I’ll start to get interested if the share price falls below 500p.

Much stronger growth

FTSE 250 network security specialist Sophos Group (LSE: SOPH) is enjoying much stronger growth. The company said recently that it expects to report billing growth of 20%-22% for the year ended 31 March. Management says the business remains on target for annual billings of $1bn by 2020.

Strong growth in billings is encouraging, but what about profit? Since floating in 2015, Sophos hasn’t made a profit. However, analysts expect the group to move into the black this year with an adjusted net profit of $21.7m. Profits are then expected to rise by 59% to $46m in 2018/19.

A cash machine?

Like Sage, Sophos benefits from customers paying upfront for its services. This is why the company generated an operating loss of $23.8m during the first half of the year, but also generated free cash flow of $61.7m.

These upfront payments are initially booked as deferred revenue, which is classed as a liability. They should generate accounting revenue and (hopefully) profit as they’re delivered over the next year and beyond.

Should you buy?

One of the risks of taking cash upfront is that if future sales growth slows, a company can experience a cash crunch. Although this might not be a problem for Sophos, I am concerned that a lot of future growth is already reflected in the share price.

With the stock trading on 65 times 2019 forecast earnings, I think there’s a high risk that the shares’ recent decline could continue. I think there’s better value elsewhere for income and growth investors.

The post Is dividend stock Sage a top FTSE 100 buy after 10% share price slump today? appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Sage Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Latest retail sales data this week lifted some of the gloom with the Office for National Statistics (ONS) advising that sales snapped back in February, rising 0.8% month-on-month.

However, scratch a little deeper and the latest release still made for grim reading. Firstly, thanks to declines in both December and January, retail sales in the UK still dropped 0.4% in the quarter ending February, illustrating the broad downward trend in shopper activity.

And there was little for sellers of non-food goods like Dixons Carphone (LSE: DC) to celebrate in particular, as both the value and volume of goods sold last month fell 0.3% from January levels. The ONS said this decline was down to consumers choosing instead to “spend on essential items” at the expense of discretionary goods.

Against the wall

And these tough conditions have been illustrated by the sheer number of spooky updates from across  the retail sector.

Just this week, menswear retailer Moss Bros shocked the market with yet another profit warning; DIY specialist Kingfisher cautioned that trading conditions are becoming tougher in Britain; and Carpetright advised it was exploring entering a company voluntary arrangement and was planning to close a raft of stores up and down the country.

The situation is particularly bleak for sellers of ‘big ticket’ items such as electricals, naturally, as underlined by Dixons Carphone’s decision in January to narrow its profits guidance for the year. It said then that it expected to deliver profit before tax within a £365m-£385m range, down from the target of £360m-£400m. And it’s not outside the realms of possibility to expect another cut before the period is through.

Cheap and cheerless

City analysts are expecting the FTSE 250 business to report a painful 26% earnings decline in the 12 months ending April, and although a 3% rebound is forecast for fiscal 2019, I cannot help but fear that this optimism is a little fragile.

With both figures in such severe jeopardy, I would give little regard to Dixons Carphone’s low forward P/E ratio of 7 times and stay away. Heck, I would even be happy to ignore its large 6.4% dividend yield in the current climate.

A sage selection

Any cash you contemplate spending on the gadgets giant would be much better served by splashing out on The Sage Group (LSE: SGE), in my opinion.

The FTSE 100 business has failed to break back following the sharp sell-off in January that reflected signs of a soft start to the year. However, I see this is a prime buying opportunity. The accountancy software provider has long proven itself to be a dependable earnings expander, thanks to the indispensable nature of its services. And its move to subscription-based products should herald the next step on its growth journey.

City brokers are expecting profits rises of 11% and 10% in 2018 and 2019, respectively. I reckon a forward P/E ratio of 19.3 times is an attractive level upon which to grab a slice of Sage.

The post Why I’d sell this 6% yielder to buy this FTSE 100 growth star appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Sage Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

However, the accountancy giant has fallen to three-month lows in Wednesday trading, with investors taking fright after the release of first-quarter trading numbers. The share was last 9% lower in the day.

Don’t be hasty!

Sage declared today that group organic revenues rose 6.3% between October-December, disappointing market expectations and signalling a soft start to the year.

I think that today’s sell-off is looking just a tad OTT. However, even if it also reflects not-insignificant amounts of profit booking after recent share price strength, Sage has seen its market value swell 30% in the 12 months to the start of today’s trading.

Indeed, there was still plenty to cheer in the FTSE 100 giant’s latest release. Organic recurring revenues grew 7% in the first quarter, thanks to software subscription growth of 26%.

These early results haven’t exactly spooked Sage either, with chief executive Steve Hare commenting: “Quarter one results are in line with our expectations.” He added that the huge sums it has dedicated to sales training in the period has pushed some revenues into the second quarter.

And Hare expects sales to pick up steam in the months ahead, noting: “We expect acceleration throughout the year including a stronger quarter two and we reiterate our full year guidance of around 8% organic revenue growth and around 27.5% organic operating margin for [fiscal 2018].”

Bright forecasts

Sage has long been a reliable pick for investors seeking robust earnings growth, and City analysts are not expecting the firm’s bottom line to stop swelling any time soon.

A 12% profits improvement is forecast for the year to September 2018, and an additional 10% increase is forecast for next year.

And this bright outlook means that share pickers can look forward to increasingly-appetising dividends, too. Sage’s ultra-progressive policy is expected to push the dividend from 15.42p in fiscal 2017 to 17p this year, and to 18.7p in the following period, so share pickers can bask in chunky yields of 2.3% this year and 2.5% next.

Sage can still be considered an expensive pick despite today’s market slump, its forward P/E ratio of 22 times sailing above the widely-regarded value terrain of 15 times and below.

But in my opinion the company is worthy of this premium given the terrific progress it is making in the growth market of North America. And with new product launches in recent months set to be followed with more in the months ahead, I expect sales to pick up sooner rather than later.

Home comforts

The gaping imbalance between homes supply and demand in Ireland means that Cairn Homes (LSE: CRN) is another great growth bet for investors to tap into today.

Just this month, the Dublin business commented: “The supply of new residential homes in the Irish market will continue to significantly undershoot demand in 2018 and 2019,” adding: “This, allied with strong demographics, strengthening mortgage market fundamentals and a growing economy are all supportive of Cairn’s business model.”

So in 2018, City brokers are predicting that earnings will explode 427%, an estimate which also leaves the builder dealing on a dirt-cheap forward P/E ratio of 9.9 times. Another 81% advance is forecast for 2019, and it’s not difficult to see profits powering higher beyond this as Cairn plans to turbocharge build rates through to the end of the decade.

The post The Sage Group plc: a FTSE 100 growth stock I could retire on appeared first on The Twelfth Magpie.

More reading

• Forget SpaceX shares! I’d rather buy these FTSE 100 growth heroes
• 2 beaten-down FTSE 100 bargains I’m tipping to rebound!
• How have Sage shares become a dividend machine? 5 reasons why!
• 2 beaten-down stocks I’m tempted to buy for my ISA today
• Down 33%, is there a once-in-a-decade chance to buy this quality FTSE 100 stock?

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Sage Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Sage advice

FTSE 100-listed The Sage Group (LSE: SGE) has enjoyed a storming five years, its share price up 161% in that time, including 22% growth in 2017 alone. With a current market cap of £8.61bn it is hardly a big fish like Apple Inc, but it isn’t small fry either. I spotted a buying opportunity in April when the share price hit 654p. Today it is 22% higher at 797p.

Sage offers integrated accounting, payroll and payments solutions to businesses around the world, and last August was picked out as a ‘Best of British’ stock by Goldman Sachs, which reckons it should benefit from improved renewal rates and customers switching to its subscription-based model with more cross-selling opportunities.

Silver lining

In November, Sage reported strong 6.6% revenue growth to £1.7bn for the year, with recurring revenues making up 78% of the total, and software subscriptions up from 22% in 2014 to 37% today. The launch of Sage Business Cloud in October should further lift the business, as it has developed a range of cloud-based accounting software in just three years.

A growing company, in a growing area – what’s not to like? Not much, frankly. Sage’s earnings per share (EPS) have now grown for five consecutive years and are forecast to increase 12% in the year to 30 September 2018. The yield is 2.1%, well below the FTSE average of 3.81%, but cover is solid at two. Inevitably, the only thing not to like is the price, a forecast 23.6 times earnings. That is the price you pay for success and I would expect Sage to deliver more of it. Here’s another tech play you might like.

Cloud nine

Keeping our head in the clouds, we find technology high-flier AIM-listed Iomart Group (LSE: IOM). Its share price leapt 32% last year, and it is up a cracking 133% over three years. The cloud computing services provider reported positive half-yearly results in December, with revenue up 12% to £47m and adjusted profit before tax rising 9% to £11.6m. It also issued its maiden interim dividend of 2.25p per share.

Iomart is a small company with a massive target market as more businesses look for help in migrating to cloud platforms. It offers them the skills to manage private and public cloud services, with e-commerce one of its fastest-growing areas.

Float on

Today could be an attractive time to enter this £423m company, which reported an 18% jump in EPS in 2017, and its rich vein of earnings growth is forecast to continue at 7% in 2018 and 13% in 2019. By then, the yield is expected to hit 2%.

I was bracing myself for a stonking valuation given recent high growth rates, but Iomart currently trades at a forecast 18.7 times earnings, which is hardly daunting. Small-caps are always risky but the company’s low debt levels and high levels of cash generation bring comfort. The cloud is the limit.

The post These 2 tech stocks could make you amazingly rich in 2018 appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Sage Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.