Sage Group share price is gaining momentum: Is it a buy now?

on Nov 16, 2022
  • Sage share price has rallied by more than 35% from its YTD low.
  • The company’s organic growth jumped to 1.92 billion pounds.
  • It also expanded its operating and EBITDA margins.

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Sage (LON: SGE) share price recovery gained momentum as investors reacted to the latest financial results. The stock surged by more than 6% on Wednesday and reached a high of 804p, the highest point since January 21st this year. It has rallied by over 36% from its lowest level this year.

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Sage earnings review

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Sage Group announced strong results even as companies continued slashing their spending. Organic recurring revenue rose by 9% in FY22, helped by Sage Business Cloud growth rate of 24%. Its Annual Run Rate (ARR) was 12%, helped by momentum in all geographies. 

Meanwhile, the company managed to expand its operating margin to 19.9% while its basic EPS growth expanded to 8%. In real numbers, the total organic revenue rose to £1.92 billion while its EBITDA rose by 3% to £468 million. In a statement, the company’s CEO said:

“I am confident that our resilient business model together with our strategy for delivering efficient growth, centered on our expanding digital network, will enable us to create further long-term value for all our stakeholders.”

Sage Group, one of the biggest technology companies in the FTSE 100, provides accounting solutions to small businesses. Its products are accounting, payroll, and human resources. In this business, it competes with the likes of Intuit, Xero, and NetSuite among others. 

Sage has grown mostly organically in the past few years. It has also grown through acquisitions. This year, the firm has made several acquisitions, including Lockstep, Spherics, Mateo, and Futlri. 

Sage Group is a good investment for several reasons. First, it has a strong and growing market share in SMB accounting. Second, it has strong annual recurring revenues. And finally, the company has growing margins and strong dividends.

Sage share price forecast

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Sage share price

The daily chart shows that the Sage stock price made a strong rebound on Wednesday. Before that, the stock was forming an inverted head and shoulders pattern, which is usually a bullish sign. The shares have moved above all moving averages.

In the same period, the Relative Strength Index (RSI) has moved above the overbought level. Therefore, the shares will likely continue rising as buyers focus on the next psychological level of 1,000p. A drop below the key support level at 762p will invalidate the bullish view.


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