SaaS Migration And Composable Commerce Will Secure Future Progress

Key Takeaways

• The transition to SaaS and focus on cost-efficient payments aim to enhance recurring revenue and improve net margins.
  
• Investment in technology and cost control efforts aim to boost conversion rates and support long-term profitability.
  
• Accesso Technology Group's revenue growth is hindered by market unpredictability, economic uncertainty, and reliance on seasonal attractions, raising concerns about earnings and margins.

Catalysts

Develops technology solutions for the attractions and leisure industry in the United Kingdom, other European countries, Australia, the South Pacific, Asia, Africa, the United States, Canada, Mexico, and Central and South America.

• accesso Technology Group is focused on increasing the pace of new wins and market penetration by optimizing its sales and marketing infrastructure to expand its sales team's capacity, which is expected to drive up future revenue.
  
• The company is transitioning ski customers from legacy on-prem solutions to a new SaaS offering, which is anticipated to increase recurring revenue and improve net margins due to the higher-margin nature of SaaS.
  
• accesso is exploring opportunities to integrate further into the payments process to increase its share of wallet and improve net margins by offering more cost-efficient payment solutions to its clients.
  
• Investment in new technology, particularly the development of the composable commerce product, aims to enhance the guest mobile experience and improve conversion rates, thus potentially boosting revenue and earnings.
  
• With a focus on cost control, including optimizing server costs and leveraging AI for development efficiencies, the company plans to maintain or improve net margins while reinvesting in growth initiatives to support long-term profitability.

accesso Technology Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming accesso Technology Group's revenue will grow by 3.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 6.0% today to 8.7% in 3 years time.
• Analysts expect earnings to reach $14.7 million (and earnings per share of $0.37) by about April 2028, up from $9.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 29.9x on those 2028 earnings, up from 25.6x today. This future PE is greater than the current PE for the GB Software industry at 26.8x.
• Analysts expect the number of shares outstanding to decline by 0.74% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.24%, as per the Simply Wall St company report.

accesso Technology Group Future Earnings Per Share Growth

Risks

• Accesso Technology Group faces significant market unpredictability, including softer macroeconomic conditions and inconsistent attendance across different attractions, potentially impacting future revenue growth.
  
• The company acknowledges that achieving growth above the 5.3% rate seen in 2024 is unlikely due to ongoing economic uncertainty, which could dampen future earnings and market expectations.
  
• Despite a diverse portfolio, transactional revenues were only up 2.5%, attributed largely to existing operations and market conditions rather than new customer acquisition or increased market penetration, which could impact overall revenue.
  
• High dependence on the seasonality of attractions and ski sectors means that revenue is concentrated in key months, leaving the company vulnerable to adverse conditions in those periods, which could affect net margins.
  
• The operational costs, including headcount and technology costs, are being closely managed, but any unexpected increases could squeeze net margins, especially in a competitive market with slower transactional volume growth.

Valuation

• The analysts have a consensus price target of £6.721 for accesso Technology Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £7.19, and the most bearish reporting a price target of just £6.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $168.8 million, earnings will come to $14.7 million, and it would be trading on a PE ratio of 29.9x, assuming you use a discount rate of 8.2%.
  
• Given the current share price of £4.35, the analyst price target of £6.72 is 35.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.