ASX:ARQ

Stock Analysis Report

Executive Summary

ARQ Group Limited, together with its subsidiaries, provides digital solutions worldwide.

Rewards

Trading at 73.8% below its fair value

Earnings are forecast to grow 120.83% per year

Risk Analysis

Interest payments are not well covered by earnings

Highly volatile share price over past 3 months

Does not have a meaningful market cap (A$46M)



Snowflake Analysis

Reasonable growth potential and fair value.


Similar Companies

Share Price & News

How has Arq Group's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: ARQ's share price has been volatile over the past 3 months.


Market Performance


7 Day Return

-1.3%

ARQ

-1.5%

AU IT

0.3%

AU Market


1 Year Return

-81.2%

ARQ

24.4%

AU IT

17.3%

AU Market

Return vs Industry: ARQ underperformed the Australian IT industry which returned 24.4% over the past year.

Return vs Market: ARQ underperformed the Australian Market which returned 17.3% over the past year.


Shareholder returns

ARQIndustryMarket
7 Day-1.3%-1.5%0.3%
30 Day-8.4%0.6%-1.0%
90 Day-29.6%0.5%-0.1%
1 Year-80.8%-81.2%26.9%24.4%23.1%17.3%
3 Year-77.9%-80.4%55.5%43.8%36.2%17.5%
5 Year-67.4%-72.9%88.7%65.5%61.4%25.0%

Price Volatility Vs. Market

How volatile is Arq Group's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is Arq Group undervalued compared to its fair value and its price relative to the market?

>50%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: ARQ (A$0.38) is trading below our estimate of fair value (A$1.45)

Significantly Below Fair Value: ARQ is trading below fair value by more than 20%.


Price To Earnings Ratio

PE vs Industry: ARQ is unprofitable, so we can't compare its PE Ratio to the IT industry average.

PE vs Market: ARQ is unprofitable, so we can't compare its PE Ratio to the Australian market.


Price to Earnings Growth Ratio

PEG Ratio: Insufficient data to calculate ARQ's PEG Ratio to determine if it is good value.


Price to Book Ratio

PB vs Industry: ARQ is good value based on its PB Ratio (0.3x) compared to the AU IT industry average (2.5x).


Next Steps

Future Growth

How is Arq Group forecast to perform in the next 1 to 3 years based on estimates from 4 analysts?

120.8%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: ARQ is forecast to become profitable over the next 3 years, which is considered faster growth than the savings rate (1.1%).

Earnings vs Market: ARQ is forecast to become profitable over the next 3 years, which is considered above average market growth.

High Growth Earnings: ARQ's is expected to become profitable in the next 3 years.

Revenue vs Market: ARQ's revenue (5.8% per year) is forecast to grow faster than the Australian market (3.6% per year).

High Growth Revenue: ARQ's revenue (5.8% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: ARQ's Return on Equity is forecast to be low in 3 years time (3.3%).


Next Steps

Past Performance

How has Arq Group performed over the past 5 years?

4.4%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: ARQ is currently unprofitable.

Growing Profit Margin: ARQ is currently unprofitable.


Past Earnings Growth Analysis

Earnings Trend: ARQ is unprofitable, but has reduced losses over the past 5 years at a rate of 4.4% per year.

Accelerating Growth: Unable to compare ARQ's earnings growth over the past year to its 5-year average as it is currently unprofitable

Earnings vs Industry: ARQ is unprofitable, making it difficult to compare its past year earnings growth to the IT industry (60.9%).


Return on Equity

High ROE: ARQ has a negative Return on Equity (-0.18%), as it is currently unprofitable.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is Arq Group's financial position?


Financial Position Analysis

Short Term Liabilities: ARQ's short term assets (A$81.8M) exceed its short term liabilities (A$75.8M).

Long Term Liabilities: ARQ's short term assets (A$81.8M) do not cover its long term liabilities (A$119.0M).


Debt to Equity History and Analysis

Debt Level: ARQ's debt to equity ratio (49.8%) is considered high.

Reducing Debt: ARQ's debt to equity ratio has increased from 0% to 49.8% over the past 5 years.

Debt Coverage: ARQ's debt is not well covered by operating cash flow (6.9%).

Interest Coverage: ARQ is unprofitable, therefore interest payments are not well covered by earnings.


Balance Sheet

Inventory Level: ARQ has a low level of unsold assets or inventory.

Debt Coverage by Assets: ARQ's debt is covered by short term assets (assets are 1x debt).


Next Steps

Dividend

What is Arq Group's current dividend yield, its reliability and sustainability?

4.96%

Forecast Dividend Yield


Dividend Yield vs Market

company0%marketbottom25%2.4%markettop25%5.6%industryaverage2.5%forecastin3Years5.0%

Current dividend yield vs market & industry

Notable Dividend: Unable to evaluate ARQ's dividend yield against the bottom 25% of dividend payers, as the company has not reported any payouts.

High Dividend: Unable to evaluate ARQ's dividend yield against the top 25% of dividend payers, as the company has not reported any payouts.


Stability and Growth of Payments

Stable Dividend: Insufficient data to determine if ARQ's dividends per share have been stable in the past.

Growing Dividend: Insufficient data to determine if ARQ's dividend payments have been increasing.


Current Payout to Shareholders

Dividend Coverage: ARQ is not paying a notable dividend for the Australian market.


Future Payout to Shareholders

Future Dividend Coverage: No need to calculate the sustainability of ARQ's dividend in 3 years as they are not forecast to pay a notable one for the Australian market.


Next Steps

Management

What is the CEO of Arq Group's salary, the management and board of directors tenure and is there insider trading?

1.1yrs

Average management tenure


CEO

Tristan Sternson 0

0.3yrs

Tenure

0

Mr. Tristan Sternson serves as Interim Chief Executive Officer at Arq Group Limited (previously known as Melbourne IT Limited) since September 23, 2019 and also serves as its Executive Director of Customer ...


Management Age and Tenure

1.1yrs

Average Tenure

Experienced Management: ARQ's management team is not considered experienced ( 1.1 years average tenure), which suggests a new team.


Board Age and Tenure

2.4yrs

Average Tenure

Experienced Board: ARQ's board of directors are not considered experienced ( 2.4 years average tenure), which suggests a new board.


Insider Trading

Insider Buying: ARQ insiders have bought more shares than they have sold in the past 3 months.


Recent Insider Transactions

BuyAU$52,10908 Oct 19
Andrew Macpherson
EntityIndividual
Role
Member of the Board of Directors
Non-Executive Director
Shares133,340
Max PriceAU$0.39
BuyAU$113,39203 Oct 19
Karl Peter Siegling
EntityIndividual
Role
Member of the Board of Directors
Non-Executive Director
Shares300,000
Max PriceAU$0.38
BuyAU$58,19602 Oct 19
Simon Martin
EntityIndividual
Role
Member of the Board of Directors
Non-Executive Director
Shares155,963
Max PriceAU$0.38
BuyAU$13,04413 Sep 19
Naseema Sparks
EntityIndividual
Role
Member of the Board of Directors
Non-Executive Director
Shares23,144
Max PriceAU$0.56
BuyAU$24,99907 Jun 19
Simon Martin
EntityIndividual
Role
Member of the Board of Directors
Non-Executive Director
Shares16,447
Max PriceAU$1.52
BuyAU$157,83905 Jun 19
Andrew Reitzer
EntityIndividual
Role
Chairman of the Board
Non-Executive Chairman
Shares95,660
Max PriceAU$1.65
BuyAU$44,28604 Jun 19
Andrew Reitzer
EntityIndividual
Role
Chairman of the Board
Non-Executive Chairman
Shares26,840
Max PriceAU$1.65
SellAU$327,59427 May 19
Martin Mercer
EntityIndividual
Shares190,941
Max PriceAU$1.75
SellAU$327,59427 May 19
Martin Mercer
EntityIndividual
Shares190,941
Max PriceAU$1.75

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Management Team

  • Tristan Sternson

    Interim CEO & Executive Director of Customer Solutions

    • Tenure: 0.3yrs
  • Fraser Bearsley

    CFO & Company Secretary

    • Tenure: 2.2yrs
    • Compensation: AU$295.56k
  • Eytan Lenko

    Executive Director of Mobile Practice

    • Tenure: 0yrs
  • Steve McCormick

    Executive Director of Cloud Practice

    • Tenure: 0yrs
  • Garth Jones

    Head of Managed Services

    • Tenure: 0yrs
  • Gideon Kowadlo

    Executive Director of Innovation

    • Tenure: 2.4yrs
  • Anne Jordan

    Company Secretary

    • Tenure: 1.3yrs
  • Sam Cavanagh

    Chief People & Culture Officer

    • Tenure: 0.9yrs
  • Annie Mackin

    Chief Marketing Officer

    • Tenure: 0.3yrs

Board Members

  • Karl Peter Siegling

    Non-Executive Director

    • Tenure: 0.3yrs
  • Andrew Reitzer (64yo)

    Non-Executive Chairman

    • Tenure: 1.3yrs
    • Compensation: AU$80.67k
  • Naseema Sparks (66yo)

    Non-Executive Director

    • Tenure: 7.7yrs
    • Compensation: AU$95.13k
  • Simon Martin

    Non-Executive Director

    • Tenure: 2.4yrs
    • Compensation: AU$90.57k
  • Larry Bloch

    Non-Executive Director

    • Tenure: 5.7yrs
    • Compensation: AU$84.18k
  • Andrew Macpherson

    Non-Executive Director

    • Tenure: 2.4yrs
    • Compensation: AU$84.18k

Company Information

Arq Group Limited's company bio, employee growth, exchange listings and data sources


Key Information

  • Name: Arq Group Limited
  • Ticker: ARQ
  • Exchange: ASX
  • Founded: 1996
  • Industry: Internet Services and Infrastructure
  • Sector: Software
  • Market Cap: AU$46.410m
  • Shares outstanding: 122.13m
  • Website: https://www.arq.group

Number of Employees


Location

  • Arq Group Limited
  • 680 George Street
  • Level 23
  • Sydney
  • New South Wales
  • 2000
  • Australia

Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
ARQASX (Australian Securities Exchange)YesOrdinary SharesAUAUDDec 1999
MLBE.FOTCPK (Pink Sheets LLC)YesOrdinary SharesUSUSDDec 1999
ARQCHIA (Chi-X Australia)YesOrdinary SharesAUAUDDec 1999

Biography

ARQ Group Limited, together with its subsidiaries, provides digital solutions worldwide. It operates through SMB Solutions and Enterprise segments. The SMB Solutions segment provides domain name registrati ...


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2019/12/13 10:31
End of Day Share Price2019/12/13 00:00
Earnings2019/06/30
Annual Earnings2018/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.