Morningstar

IRESS Ltd IRE

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Company Report

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Iress Earnings: Core Businesses Need Work as Noncore Segments Supported Results

Shaun Ler

Narrow-moat Iress’ first-half 2024 results exceeded expectations, with stronger revenue growth and cost reductions driving improved earnings and margins. This, combined with an upgraded earnings outlook, demonstrates Iress’ ability to still deliver revenue growth amid aggressive cost-outs, surpassing our prior rather conservative projections. We lift our fair value estimate to AUD 10.00 per share from AUD 9.60, reflecting slightly improved revenue growth assumptions, particularly from offshore businesses.

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Price vs Fair Value

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IRE is trading at a 463% premium.
Price
A$10.05
Fair Value
A$65.00
Uncertainty
High
1-Star Price
A$94.30
5-Star Price
A$4.00
Economic Moat
Hnxlvzs
Capital Allocation
Hftdyycp

Bulls Say, Bears Say

Bulls

Iress’ economic moat, leading market share, and renewed focus on its higher-returning assets should protect margins and enable strong EPS growth over the medium-term.

Bears

Iress’ trading and market data business faces the threats of active managers ceding share to passive investments, and stockbrokers transitioning toward wealth management business models.

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Trading Information

Previous Close Price
—
Day Range
—–—
52-Week Range
—–—
Bid/Ask
— / —
Market Cap
—
Volume/Avg
— / —

Key Statistics

Price/Earnings (Normalized)
11.97
Price/Sales
2.93
Dividend Yield (Trailing)
0.00%
Dividend Yield (Forward)
0.00%
Total Yield
—

Company Profile

Iress develops software for the financial-services industry, operating in multiple regions and servicing clients ranging from small retail to large institutional businesses. Its core business unit, mainly in Australia, generates most of the company's earnings and free cash flows. Iress expanded into noncore markets through acquisitions, ultimately eroding returns and margins, with free cash flows from the core business invested in the noncore businesses. Its recent strategy includes reprioritizing growth in the core APAC business and divesting/monetizing noncore businesses. We view this renewed focus on its core business as a positive, as it will help maintain Iress' economic moat.
Sector
Technology
Industry
Software - Application
Stock Style Box
Small Core
Total Number of Employees
1,422
Website
https://www.iress.com

Competitors

Valuation

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Metric
IRE
MSCI
ENV
Price/Earnings (Normalized)
 11.9739.3532.39
Price/Book Value
 6.32—6.69
Price/Sales
 2.9316.522.62
Price/Cash Flow
 28.3732.8314.48
Price/Earnings
IRE
MSCI
ENV

Financial Strength

Metric
IRE
MSCI
ENV
Quick Ratio
 1.140.840.98
Current Ratio
 1.980.961.14
Interest Coverage
 2.288.46−15.29
Quick Ratio
IRE
MSCI
ENV

Profitability

Metric
IRE
MSCI
ENV
Return on Assets (Normalized)
 < 0.01%24.14%8.08%
Return on Equity (Normalized)
 0.02%—24.81%
Return on Invested Capital (Normalized)
 1.86%37.05%10.26%
Return on Assets
IRE
MSCI
ENV

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