Exciting Platform Integrations And Strategic Acquisitions Propel Cloud And Health Innovations

Key Takeaways

• The integration and automation efforts are expected to enhance revenue and operational efficiency, boosting SS&C's presence in investment and healthcare markets.
  
• Strategic acquisitions and share repurchases aim to drive growth and shareholder value through increased synergy, cross-selling, and EPS growth.
  
• Rising Medicare costs, high debt, acquisition dependency, organic growth slowdown, and competition could challenge SS&C's revenue and market share prospects.

Catalysts

Provides software products and software-enabled services to financial services and healthcare industries.

• The integration of Aloha into the new Genesis platform is expected to enhance SS&C’s cloud-native technology offerings in the investment management market, potentially increasing future revenues through expansion in this sector.
  
• The Battea-Class Action Services acquisition, with its high growth and synergy with Fund Administration, is anticipated to boost earnings through accretive revenue and cross-selling opportunities.
  
• SS&C's internal automation efforts, especially following the acquisition of Blue Prism, have reduced headcount while supporting revenue growth, suggesting potential increased net margins due to enhanced operational efficiency.
  
• The DomaniRx platform's innovative capabilities allow SS&C to capture and expand within the health care space, supporting future revenue growth and potentially expanding market share in pharmacy and medical claims management.
  
• SS&C’s emphasis on share repurchases, supported by robust cash flow and strategic expense management, is likely to drive earnings per share (EPS) growth, enhancing shareholder value in the future.

SS&C Technologies Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming SS&C Technologies Holdings's revenue will grow by 5.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 12.3% today to 16.1% in 3 years time.
• Analysts expect earnings to reach $1.1 billion (and earnings per share of $4.35) by about October 2027, up from $706.7 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.7x on those 2027 earnings, down from 24.5x today. This future PE is lower than the current PE for the US Professional Services industry at 27.8x.
• Analysts expect the number of shares outstanding to grow by 0.6% per year for the next 3 years.
• To value all of this in today's dollars, we will use a discount rate of 6.9%, as per the Simply Wall St company report.

SS&C Technologies Holdings Future Earnings Per Share Growth

Risks

• Rising costs for Medicare and Medicare Advantage in the healthcare industry pose a risk, as they may increase operational costs for healthcare clients, potentially affecting revenue growth for SS&C's healthcare services.
  
• A high gross debt level of $7.2 billion increases SS&C's financial risks, especially in a high-interest rate environment, which could impact net margins and earnings.
  
• Dependency on acquisitions, such as the Battea acquisition, to drive growth may pose integration risks and could impact future revenue if growth synergies are not realized effectively.
  
• A slowdown in organic revenue growth is implied for Q4 2024, potentially due to tough year-over-year comps and dependency on significant licensing deals, which could affect revenue projections and investor confidence.
  
• Increased competition in the fund administration and investment technologies space from existing and emerging platforms might limit revenue growth and market share expansion if SS&C Technologies can't keep pace with technological advancements and client needs.

Valuation

• The analysts have a consensus price target of $84.57 for SS&C Technologies Holdings 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 $92.0, and the most bearish reporting a price target of just $70.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be $6.8 billion, earnings will come to $1.1 billion, and it would be trading on a PE ratio of 23.7x, assuming you use a discount rate of 6.9%.
  
• Given the current share price of $70.45, the analyst's price target of $84.57 is 16.7% 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.