International Expansion And Automation Will Drive Long-Term Performance And Shareholder Value

Key Takeaways

• International market expansion into Australia and the Middle East supports revenue growth through substantial client acquisitions and increased presence.
  
• AI-driven automation and strategic collaborations, including with Insignia Financial, enhance operational efficiency and future revenue prospects.
  
• Foreign exchange impacts, geopolitical uncertainties, and net debt levels pose risks to SS&C Technologies' revenue growth and financial stability amidst market volatility.

Catalysts

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

• Expansion into international markets, particularly Australia and the Middle East, is a key growth catalyst for SS&C, with substantial client wins and increased presence expected to contribute positively to revenue.
  
• The integration of AI-driven automation platforms like Blue Prism, designed to enhance operational efficiency, is anticipated to reduce costs and improve net margins over time.
  
• The strategic lift-out agreement with Insignia Financial is set to contribute significantly to SS&C's revenue in the latter half of 2025, supporting a stronger revenue forecast.
  
• Continued focus on private markets and retail alternatives, particularly through the GlobeOp business, is expected to drive organic revenue growth due to high demand for higher yield investments.
  
• Ongoing share buybacks are likely to enhance EPS growth as capital is returned to shareholders, reducing the share count over time.

SS&C Technologies Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming SS&C Technologies Holdings's revenue will grow by 4.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 13.3% today to 17.2% in 3 years time.
• Analysts expect earnings to reach $1.2 billion (and earnings per share of $4.74) by about September 2028, up from $806.4 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 23.8x on those 2028 earnings, down from 26.9x today. This future PE is lower than the current PE for the US Professional Services industry at 26.3x.
• Analysts expect the number of shares outstanding to decline by 1.4% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.59%, as per the Simply Wall St company report.

SS&C Technologies Holdings Future Earnings Per Share Growth

Risks

• The unfavorable impact from foreign exchange rates has affected revenue, signaling potential ongoing market volatility and currency risk, which could impact future revenue growth projections.
  
• Despite reporting organic growth, the adjusted growth rate has built-in conservatism due to geopolitical uncertainties, which suggests a slower growth outlook and potential revenue constraints.
  
• The dissolution of a joint venture with State Street is not expected to significantly impact revenue or EBITDA, indicating potential missed growth opportunities or underperformance in that area.
  
• The healthcare business showed flat performance, and potential lumpiness due to dealing with large-scale clients could result in unpredictable revenue streams and margin pressures in future quarters.
  
• While SS&C's net leverage is manageable, the company carries $6.4 billion in net debt, which could pose a risk to earnings and cash flow should interest rates increase beyond current expectations.

Valuation

• The analysts have a consensus price target of $97.889 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 $110.0, and the most bearish reporting a price target of just $88.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $7.0 billion, earnings will come to $1.2 billion, and it would be trading on a PE ratio of 23.8x, assuming you use a discount rate of 7.6%.
• Given the current share price of $88.78, the analyst price target of $97.89 is 9.3% 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.