The Bravura Solutions Ltd (ASX:BVS) share price has come under pressure this year. Here’s why Goldman Sachs thinks it could be a bargain buy…
The post Why the Bravura (ASX:BVS) share price could be in the bargain bin appeared first on The Motley Fool Australia. –
One area of the market which is filled with a number of quality options for growth investors is the mid cap space.
Why Bravura Solutions?
Bravura is a financial technology company with a growing portfolio of software solutions. This includes the popular Sonata wealth management platform and the Midwinter financial planning software platform.
In addition to this, its FinoComp business builds unique, registry-agnostic and highly flexible software that supports the UK wealth market and its Delta Financial Systems business provides technology to power complex pensions administration in the UK market.
Unfortunately, FY 2021 has been a very difficult year for Bravura because of the pandemic and Brexit. In light of this, a weak full year result is expected from the company this year.
However, analysts at Goldman Sachs believe this is a short term headwind and are expecting its performance to rebound in FY 2022. As a result, it recently held firm with its buy rating and put a $3.70 price target on Bravura’s shares.
Based on the latest Bravura share price of $2.68, this implies potential upside of 38% over the next 12 months.
Why does Goldman think the Bravura share price can go higher?
There are four key reasons why Goldman Sachs is positive on the company and expects the Bravura share price to push meaningfully higher. It explained:
“We believe BVS is well positioned due to: 1) its strong market position in existing product offering, with a high degree of recurring revenues (1H21 86%), 2) the emerging microservices ecosystem strategy will help transform the business to subscription-based model and should increase BVS’s scope and velocity of sales, 3) a net cash position provides BVS with a buffer in the current environment, but also gives the company flexibility to invest in the new microservices ecosystem and pursue acquisitions, and 4) the valuation looks undemanding, with the stock trading at the bottom of its historical relative P/E and EV/EBITDA range.”
In addition to this, Bravura could be an option for income investors to consider.
Goldman estimates that its shares offer a 3.9% FY 2022 dividend yield. This is materially more than anything you’ll find with term deposits right now.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Bravura Solutions Ltd. The Motley Fool Australia has recommended Bravura Solutions Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.