UK based Sopheon plc (SPE) is engaged in the provision of software and services in the product lifecycle management (PLM) market. The Company operates in two segments: North America and Europe. It’s Accolade solution consists of various modules, including Portfolio Management, which enable companies to prioritize product ideas, focus on resources, and bring the right products to market on time; Idea Development that develops new product ideas; Resource Planning, which aligns resources with new product development opportunities; document routing software; and Microsoft Integration that ensures process adoption and adherence. The company also offers Vision Strategist, a strategic product planning solution designed for product and IT road mapping; Accolade for Clinical Trials, which structures and automates the clinical trial process; Accolade healthcare protocol management software; and Evidence Monitor solution, which monitors targeted medical journals and databases, filters and analyzes their content, and provides alerts on information and developments related to the user’s areas of specialization. In addition, it provides consultancy and implementation services, such as requirements definition, configuration, installation, and post-production support. It principally serves automotive, aerospace, and defense sectors.Its subsidiaries include Sopheon Corporation, Alignent Software, Inc., Sopheon NV, Sopheon UK Ltd and Sopheon GmbH.
On 25th August 2016, Sopheon published interim results to the end of June, revealing a pre-tax profit of $1.6m compared to a $0.5m loss previously, on revenues up to $11.5m from $8.4m. EBITDA improved to $2.9m ($0.9m). Sopheon said 20 license transactions were closed in the period from new and existing customers compared to 15 in 2015. This included “a very substantial” order from an existing enterprise tier customer, meaning that although license deal volume increased by a third, license revenues doubled. Additionally, services revenues increased by over 50%. Looking forward, Sopheon said revenue visibility for the full-year 2016 now stands at $18.4m from just under $17m at the time of the annual general meeting in June and $15m in the previous year. Chairman Barry Mence said: “We believe that Sopheon is well positioned to capitalise on the opportunities and deliver continued progress.”
The growth potential at Sopheon had been picked up by the VectorVest stock screening system at the start of the year, when the stock traded at around 70p. Among a range of metrics highlighting value, the stock was flagged on the VectorVest Growth to P/E Ratio (GPE), which compares earnings growth rate to P/E ratio. It was noted that Sopheon has a GPE rating of 3.69. With long-term interest rates currently at 3.79%, the operative GPE ratio is 0.14, meaning Sopheon is considered to be undervalued. Secondly the Earnings Growth Rate (GRT), (which reflects a company’s one to three year forecasted earnings growth rate in percent per year) sees Sopheon score very highly with a GRT of 38%. Finally, despite the recent rise in the stock price, the VectorVest Value metric attributes a current value of 525.06p per share to Sopheon, meaning the company is still undervalued at the current 286.00p per share.
The chart of Sopheon is shown. The green line above the price chart is the VectorVest calculated valuation while the blue line in the window below the price is Earnings per Share (EPS). Technically the share is charting a symmetrical triangle with the price currently at support within the triangle. If the triangle breaks to the upside (and the fundamentals strongly think it should) then the target can be calculated by measuring the height of the move prior to the consolidation. This is known as a measured move by chartists and it suggests that a move of 200p is probable. This would take the share price to the current valuation of 525p. Traders can buy at support within the triangle or wait for a breakout of the trendline defining resistance within the triangle. VectorVest automatically calculates a stop loss and at the moment this should be placed at around 260p.
To summarise, the rate at which Sopheon continues to grow earnings marks this company out as a quality play. VectorVest attributes a current value of 525.06p per share to the stock, meaning the company is still undervalued at the current 286.00p per share. Buy.
October 24th 2016
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