Tracking a company’s stock price doesn’t provide a full picture of how that business is doing. Asure (NASDAQ: ASUR) is a great example of this. Share prices are still down 25% on the year, despite a significant gain last week, but product development, sales numbers, and the liquidity ratio show it to be a solid potential investment. Their recent Q2 financials provide evidence of that.
Just to put the share price number in perspective, the Nasdaq index as a whole is having a rough first half to 2022. The Nasdaq 100 declined in five of the first six months and the small-cap Russell 2000 had its worst first half since its inception in 1979. Even the S&P 500, which is more diversified than Nasdaq, dropped 20% between January and June.
Picking winners in this climate requires a deeper dive into company financials, not just an analysis of the most recent performance graph on Robinhood. Asure’s Q2 financial report shows financial momentum that will eventually drive up share prices. Investor behaviors and economic fears are holding them down right now.
Cash Increases Produce a Solid Balance Sheet
There are far too many public companies that are overvalued and underfunded. That’s one of the reasons the market is going through a correction right now. Asure is not one of them. Don’t let the $5.60 share price fool you. The company has a market cap of $114.61 million and a cash position of $14.6 million, according to CFO John Pence. Their Quick Ratio is 1.10.
Asure reported a revenue increase of 18% YOY in Q2 2022. Their total revenue was $20.3 million, with 94% of that coming in as recurring revenue. The profit margin is 66%. These are the numbers investors should be looking at. Will the trend continue? Mr. Pence also reported an 87% increase in new sales bookings. We’ll get into that in more detail below.
Other key performance indicators (KPIs) for Q2 include a non-GAAP EBITDA of $1.3 million, which is up 23% YOY, and a P/E ratio of 54.25. That’s in line with the projected 5-year EPS of 14% and current return on equity (ROE) of 1.10%. In other words, the expectation is for this company to continue to do well in the near future. It’s underpriced right now.
Asure Posts Strong Q2 2022 Financial Results, Reiterates Q3, Q4 and FY 22 Guidance
Despite a rocky first and second quarter for the overall U.S. economy, Asure Software’s Q2 results were a bright spot that is catching investors’ attention. During the second quarter, Asure reported total revenues of $20.3 million, which represents 18% growth year-over-year. Non-GAAP EBITDA was reported at $1.3 million, which was a 23% improvement compared to the same quarter last year.
“Asure’s second quarter showed continuing strong financial momentum with revenues growing 18% relative to prior year and Non-GAAP EBITDA growing by 23%”, said CFO John Pence. “We increased our cash position in the quarter to $14.6 million and we continue to have a solid balance sheet and liquidity profile that we believe will enable us to continue to move our strategic initiatives forward. We reaffirm our guidance for the remainder of 2022.”
As a result of the strong growth, management reiterated its revenue, non-GAAP EBITDA and non-GAAP EPS guidance for the third and fourth quarters, as well as full-year 2022. In the current economic climate that is marred with inflation and recession fears, Asure’s reiterated guidance is seen as very bullish.
For Q3 2022, management puts revenue estimates between $21 million and $21.5 million on a non-GAAP EBITDA range of $1.25 million and $1.75 million. Fourth quarter is estimated to bring further growth, as revenue guidance is set between $23 million and $23.5 million and non-GAAP EBITDA has a range of $3 million to $3.5 million. For the full year 2022, management continues to see total revenue between $88 million and $90 million and non-GAAP EBITDA between $8.5 million and $10 million. For the full management-issued guidance, see chart below:
|Revenue||$||21.0M – 21.5M||$||23.0M – 23.5M||$||88.0M – 90.0M|
|Non-GAAP EBITDA||$||1.25M – 1.75M||$||3.0M – 3.5M||$||8.5M – 10.0M|
|Non-GAAP EPS||$||(0.05) – (0.02)||$||(0.01) – 0.01||$||(0.05) – 0.02|
Sales and Revenue Growth Attributed to New Features
Asure’s growth rate is on a parallel path with the sectors they serve. One of them is human resources (HR). According to the U.S. Bureau of Labor Statistics (BLS), employment of human resources specialists is projected to grow at the rate of 10% per year between now and 2030. An average of 73,400 openings for human resources specialists are projected for each year.
Other niche markets for Asure are CPAs and payroll administrators. One of the new features they recently rolled out is an innovative Tax Portal that provides their clients greater transparency into returns, tax funding, and payment status. Pat Goepel, CEO of Asure, calls it a “gamechanger” to help their clients make more informed decisions.
The Asure Tax Portal is one more reason why this company should rise above the pack in the human capital management sector. The level of transparency in the portal is unprecedented, providing real-time insights into tax filing reports in over 7,000 U.S. tax jurisdictions. Other software systems offer only archived reporting and filing dates.
The Tax Portal wasn’t the only product rollout for Asure in Q2. They also introduced a new automated treasury management system that can help with the daily reconciliation of cash positions. That went hand-in-hand with new integrations with Automation™ Anywhere and Workato® to maximize speed and efficiency on the user end.
Wall Street Analysts’ Average Price Target for Asure is $13.00
Constant innovation is critical for software developers. Tax laws and business regulations change frequently, the sectors that Asure services are all in high-growth industries, and new technology is being developed daily. Staying ahead of the curve now, in a down market, is the best way to ensure future profitability and higher share prices in the future.
These are the variables that go into determining what the share price should be, and that price is very different from what you’re seeing right now. According to TipRanks, there are least two Wall Street analysts have set the average 12-month target price for Asure at $13.00, with a high of $14.00. That’s a 132% increase from the $5.60 it was trading as of this writing. The two analysts maintain a “moderate buy” rating on the stock.
Analysts typically base their target price estimate on valuation multiples like price to earnings (P/E = 54.25), price to book value (P/B = 0.74), and price to sales ratio (P/S = 1.44). A deep dive into these numbers shows a company that is seriously undervalued. If you’re thinking of investing, Asure (ASUR) moved above its 5-day moving average on August 11th and AI market analysts are estimating there’s an 85% chance of a continued uptrend.
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