Shares in Anite (LSE: AIE) have surged by as much as 9% today after the software and equipment company released better-than-expected results for the third quarter of the year.
This followed an upbeat first half of the year, with a seasonal lull in activity that normally takes place in the third quarter of the year being swept aside this time around. As a result, the company has maintained its full-year guidance and, as a result, investor sentiment in the company has helped to push its share price considerably higher.
And, as a result of the strong third quarter, Anite has entered the seasonally important final quarter of the year with a larger pipeline of sales opportunities than at the same time as last year, which bodes well for the near-term outlook for the company, too.
Valuation
Despite today’s share price gains, Anite still offers good value for money. For example, it currently trades on a price to earnings (P/E) ratio of 15.7 which, when you take into account its forecast growth rate in earnings over the next two years, indicates that its shares are underpriced right now.
That’s because Anite is expected to increase its bottom line by 16% next year, followed by a further rise of 11% in the year after. When combined with its P/E ratio, this equates to a price to earnings growth (PEG) ratio of just 1.1, which indicates that growth is on offer at a very reasonable price.
Sector Peers
Clearly, Anite is a relatively small company and, looking at the software and computer services sector, two of the largest companies by market capitalisation are Sage (LSE: SGE) and Micro Focus (LSE: MCRO). When comparing Anite to its two larger peers, it seems to more than hold its own.
For example, although Sage is expected to increase its bottom line by 11% next year, followed by 8% the year after, its rather rich P/E ratio of 21 seems to somewhat price this in, with it having a PEG ratio of 1.8. And, even though Micro Focus has a lower valuation that Sage or Anite, with it having a P/E ratio of 15.3, its slightly lower growth prospects equate to a PEG ratio of 1.3, which is less appealing than that of Anite.
Of course, both Sage and Micro Focus offer increased scale and diversity than Anite, which goes a long way to explaining their higher valuations. However, Anite still appears to offer great prospects at a highly appealing price and, as such, could make for an excellent partner for sector peers Micro Focus and Sage in your portfolio.
