Risk aversion among London’s investors has worked to Sage’s advantage, because a high degree of recurring revenue and market dominance make the software provider a classic defensive stock.
The shares are valued at close to a record high, equating to just over 31 times forward earnings, but there are potential catalysts ahead. A profit-sapping five years of heightened spending on research and development and marketing has ended and today revenue is growing ahead of those areas of cost. Last year the operating margin rose to 20.9 per cent, from 19.5 per cent, a trend that the accounting software specialist thinks it can replicate this year. Analysts have forecast a margin of 21.9 per cent.
Moreover, heavier spending is justified. The business has been shifting away
