Ideagen is a software company which has seen very strong growth since the appointment of David Hornsby as CEO in 2009. Revenues and adjusted pre-tax profits have increased rapidly as the group has expanded its operations through a combination of organic growth and acquisition and further strong growth is expected.

The move from Plus Markets to AIM opens up Ideagen to a broader range of potential investors and will help in the development of the group going forward. It will also raise the company’s profile not only with investors but also with potential customers.
The company is operating in a growth market and benefits from a high proportion of recurring revenues which currently cover approximately 90% of overheads, thus putting it in a strong financial position. The five year contract with the US Department of Veterans Affairs also helps to provide some visibility of future revenues.

The acquisition of niche compliance and quality management software supplier Proquis in January 2012 should help drive further value into the business. This deal was completed on sensible terms and Ideagen operates in a fragmented industry so further acquisitions seem likely going forward.

Ideagen appears to be well positioned in a growth market. The shares trade on a modest p/e ratio and with organic growth over the longer term likely to be supplemented by acquisitions, there is plenty of scope for upside. Putting the shares on a p/e ratio of 12x for 2013 would suggest a share price target of 20p, an increase of over 42% from the current level….Read more in our full note available below.

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