Sage Group share price soared to record: Here’s why it’s still a buy

Sage Group (LON: SGE) share price has been in a relentless bull run in the past few months. It has jumped in the past four straight months, which has pushed it to the highest level in 23 years. In all, the stock has risen by over 26% this year, outperforming the FTSE 100 and FTSE 250 indices.

Strong recurring revenue

Sage Group is a leading British technology company that provides a suite of products to small and large companies. Some of its top clients are firms like Radisson, Avis, and AVEVA.

Sage’s solutions help companies handle their accounting, payroll, and human resources needs. As a result, it competes with numerous well-known companies like ADP, Paychex, and Intuit. Like these companies, Sage Group has transitioned in the past few years to offer its solutions through the cloud.

Sage has other benefits. Its revenue is highly diversified, with 44% of revenue coming from the United States and 29% from the UK. The remaining clients are from Europe and the rest of the world. Most importantly, it has recurring revenue and experiences low churn.

The most recent results showed that Sage Group was doing well. Its annual recurring revenue jumped by 12% and reached 1.039 billion in the first half of the year. Total revenue jumped by 10% to 1.087 billion in the same period.

As a result, analysts have an overall bullish estimate of the company. Those at Deutsche Bank have a hold rating on the company with a target price of 800p. In their recent ratings, those at Canaccord Genuity, Shore Capital, and Barclays raised their targets. 

I believe that Sage Group is a good investment. It is demonstrating strong growth, has diversified geographical presence, and has a strong annual recurring revenue. As a company that reports in the British pound, its strong American presence is a tailwind.

Sage Group share price forecast

SAGE chart by TradingView

I wrote about Sage Group in November last year and predicted that the stock would rise to 1000p. This view is working out nicely since the stock is just 80p short of this target. On the daily chart, the shares managed to cross the important resistance point at 803p (November 22 and February 3rd high). 

The shares have moved above all moving averages while the momentum indicator has drifted upwards. Further, the Average Directional Index (ADX) has risen to 30, signaling that the trend is strong. Therefore, the outlook for the Sage stock price is still bullish, with the target being at 1,000p.