ASX:RKN

Stock Analysis Report

Executive Summary

Reckon Limited provides software solutions for small to larger businesses, accountants, bookkeepers, and lawyers in Australia, the United States, and others.

Rewards

Trading at 32.5% below its fair value

Earnings are forecast to grow 1.37% per year

Risk Analysis

Has a high level of debt

Dividend of 7.59% is not well covered by earnings

Does not have a meaningful market cap (A$89M)



Snowflake Analysis

Undervalued with acceptable track record.


Similar Companies

Oracle

NYSE:ORCL

Share Price & News

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


Latest Share Price and Events

Stable Share Price: RKN has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

-2.0%

RKN

-0.2%

AU Software

0.6%

AU Market


1 Year Return

5.0%

RKN

48.3%

AU Software

20.2%

AU Market

Return vs Industry: RKN underperformed the Australian Software industry which returned 47.9% over the past year.

Return vs Market: RKN underperformed the Australian Market which returned 19.4% over the past year.


Shareholder returns

RKNIndustryMarket
7 Day-2.0%-0.2%0.6%
30 Day-5.2%4.0%4.3%
90 Day0%11.2%4.9%
1 Year9.6%5.0%49.6%48.3%25.6%20.2%
3 Year-47.3%-55.5%153.1%141.9%39.4%20.7%
5 Year-51.2%-61.8%204.3%180.5%60.8%24.6%

Price Volatility Vs. Market

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


Simply Wall St News

Valuation

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

36.3%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: RKN (A$0.79) is trading below our estimate of fair value (A$1.17)

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


Price To Earnings Ratio

PE vs Industry: RKN is good value based on its PE Ratio (11.4x) compared to the Software industry average (37.5x).

PE vs Market: RKN is good value based on its PE Ratio (11.4x) compared to the Australian market (18.9x).


Price to Earnings Growth Ratio

PEG Ratio: RKN is poor value based on its PEG Ratio (8.3x)


Price to Book Ratio

PB vs Industry: RKN is good value based on its PB Ratio (4.2x) compared to the AU Software industry average (4.3x).


Next Steps

Future Growth

How is Reckon forecast to perform in the next 1 to 3 years based on estimates from 2 analysts?

1.4%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: RKN's forecast earnings growth (1.4% per year) is above the savings rate (1.1%).

Earnings vs Market: RKN's earnings (1.4% per year) are forecast to grow slower than the Australian market (9.6% per year).

High Growth Earnings: RKN's earnings are forecast to grow, but not significantly.

Revenue vs Market: RKN's revenue (1.2% per year) is forecast to grow slower than the Australian market (3.8% per year).

High Growth Revenue: RKN's revenue (1.2% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: RKN's Return on Equity is forecast to be high in 3 years time (36.6%)


Next Steps

Past Performance

How has Reckon performed over the past 5 years?

-23.0%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: RKN has high quality earnings.

Growing Profit Margin: RKN's current net profit margins (10.5%) are higher than last year (9.2%).


Past Earnings Growth Analysis

Earnings Trend: RKN's earnings have declined by -23% per year over the past 5 years.

Accelerating Growth: RKN's earnings growth over the past year (9.1%) exceeds its 5-year average (-23% per year).

Earnings vs Industry: RKN earnings growth over the past year (9.1%) underperformed the Software industry 22.6%.


Return on Equity

High ROE: Whilst RKN's Return on Equity (37.15%) is high, this metric is skewed due to their high level of debt.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is Reckon's financial position?


Financial Position Analysis

Short Term Liabilities: RKN's short term assets (A$14.9M) do not cover its short term liabilities (A$16.5M).

Long Term Liabilities: RKN's short term assets (A$14.9M) do not cover its long term liabilities (A$50.5M).


Debt to Equity History and Analysis

Debt Level: RKN's debt to equity ratio (176%) is considered high.

Reducing Debt: RKN's debt to equity ratio has increased from 30% to 176% over the past 5 years.

Debt Coverage: RKN's debt is well covered by operating cash flow (27.3%).

Interest Coverage: RKN's interest payments on its debt are well covered by EBIT (7.3x coverage).


Balance Sheet

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

Debt Coverage by Assets: RKN's debt is not covered by short term assets (assets are 0.4x debt).


Next Steps

Dividend

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

8.22%

Current Dividend Yield


Dividend Yield vs Market

company8.2%marketbottom25%2.3%markettop25%5.6%industryaverage1.1%forecastin3Years6.5%

Current dividend yield vs market & industry

Notable Dividend: RKN's dividend (7.59%) is higher than the bottom 25% of dividend payers in the Australian market (2.34%).

High Dividend: RKN's dividend (7.59%) is in the top 25% of dividend payers in the Australian market (5.47%)


Stability and Growth of Payments

Stable Dividend: RKN's dividend payments have been volatile in the past 10 years.

Growing Dividend: RKN's dividend payments have not increased over the past 10 years.


Current Payout to Shareholders

Dividend Coverage: Unable to calculate sustainability of dividends as RKN has not reported any payouts.


Future Payout to Shareholders

Future Dividend Coverage: RKN's dividends in 3 years are forecast to be covered by earnings (66.7% payout ratio).


Next Steps

Management

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

17.3yrs

Average management tenure


CEO

Sam Allert 0

0yrs

Tenure

AU$723,302

Compensation

Mr. Samuel Allert, also known as Sam, has been Group Chief Executive Officer and Executive Director at Reckon Limited since July 1, 2018. Mr. Allert served as Managing Director of Business and Accountant G ...


CEO Compensation Analysis

Compensation vs Market: Sam's total compensation ($USD499.17K) is above average for companies of similar size in the Australian market ($USD262.68K).

Compensation vs Earnings: Sam's compensation has been consistent with company performance over the past year.


Management Age and Tenure

17.3yrs

Average Tenure

58.5yo

Average Age

Experienced Management: RKN's management team is seasoned and experienced (17.3 years average tenure).


Board Age and Tenure

1.5yrs

Average Tenure

60yo

Average Age

Experienced Board: RKN's board of directors are not considered experienced ( 1.5 years average tenure), which suggests a new board.


Insider Trading

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Recent Insider Transactions

BuyAU$1,061,63310 Apr 19
Spheria Asset Management Pty Ltd
EntityCompany
Shares1,602,528
Max PriceAU$0.67
BuyAU$19,05427 Feb 19
Samuel Allert
EntityIndividual
Role
Chief Executive Officer
Group CEO & Executive Director
Shares28,500
Max PriceAU$0.68

Ownership Breakdown

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


Management Team

  • Myron Zlotnick (54yo)

    Company Secretary

    • Tenure: 17.3yrs
    • Compensation: AU$631.65k
  • Clive Rabie (59yo)

    Group MD & Executive Director

    • Tenure: 15yrs
    • Compensation: AU$1.95m
  • Greg Wilkinson (63yo)

    Founder & Chairman

    • Tenure: 1.5yrs
    • Compensation: AU$125.79k
  • Chris Hagglund (58yo)

    Group Chief Financial Officer

    • Tenure: 15.3yrs
    • Compensation: AU$759.60k
  • Paul James

    General Manager of Professional Division Australia and General Manager of Aps Australia

    • Compensation: AU$320.48k
  • Grant Linton

    General Manager of Professional Division - New Zealand

    • Compensation: AU$186.10k
  • Sam Allert

    Group CEO & Executive Director

    • Compensation: AU$723.30k

Board Members

  • Clive Rabie (59yo)

    Group MD & Executive Director

    • Tenure: 15yrs
    • Compensation: AU$1.95m
  • Greg Wilkinson (63yo)

    Founder & Chairman

    • Tenure: 1.5yrs
    • Compensation: AU$125.79k
  • Phil Hayman (60yo)

    Independent Non-executive Director

    • Tenure: 1.5yrs
    • Compensation: AU$43.80k
  • Sam Allert

    Group CEO & Executive Director

    • Compensation: AU$723.30k

Company Information

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


Key Information

  • Name: Reckon Limited
  • Ticker: RKN
  • Exchange: ASX
  • Founded: 1987
  • Industry: Application Software
  • Sector: Software
  • Market Cap: AU$82.443m
  • Shares outstanding: 112.94m
  • Website: https://www.reckon.com

Location

  • Reckon Limited
  • 100 Pacific Highway
  • Level 2
  • North Sydney
  • New South Wales
  • 2060
  • Australia

Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
RKNASX (Australian Securities Exchange)YesOrdinary SharesAUAUDJul 1999
RKNCHIA (Chi-X Australia)YesOrdinary SharesAUAUDJul 1999
UVWDB (Deutsche Boerse AG)YesOrdinary SharesDEEURJul 1999

Biography

Reckon Limited provides software solutions for small to larger businesses, accountants, bookkeepers, and lawyers in Australia, the United States, and others. It operates through Business Group, Accountant Practice Management Group, and Legal Practice Management Group segments. The Business Group segment engages in the development, distribution, and support of business accounting and personal financial software, as well as related products and services under the Reckon Accounts and Reckon One names. The Legal Practice Management Group segment develops, distributes, and supports practice management, tax, client accounting, and related software under the APS brand, as well as the Reckon Docs and Reckon Elite products. The Accountant Practice Management Group segment engages in the development, distribution, and support of cost recovery, cost management, scan, and related software under the nQueue Billback brand primarily to the legal market. This segment also supplies corporate services, such as company registration and company secretarial tools; and supplies relevant content under the Reckon Docs brand. The company was founded in 1987 and is headquartered in North Sydney, Australia. 


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2020/01/24 10:34
End of Day Share Price2020/01/23 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.