Stock market crash: A cheap share I consider a great opportunity

Jabran Khan explores what he considers a great market crash opportunity in the shape of a small-cap technology stock with defensive qualities.

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During a market crash, looking for stocks with defensive qualities is key. Defensive stocks have the qualities that will enable them to weather the storm. With this in mind, I am very interested in small-cap stock Aptitude Software (LSE:APTD) right now. Formerly a subsidiary of Microgen, APTD’s success led to its demerger just last year.

During the pandemic, technology stocks such as APTD have been behaving a lot like defensive stocks traditionally do during a downturn. Given the nature of this downturn, the technology sector’s relative success comes as little surprise to me. The pandemic has dealt a major blow to spending across the board, but businesses have relied on technology more than ever to continue operations. This is exactly what Aptitude Software offers and therefore its impressive results during the pandemic period make sense. 

Market crash opportunity

APTD provides accounting and finance software across a mix of industries, with a particular focus on the operations of a chief financial officer. Currently, APTD provides over 75 CFOs with their software. Combined, these CFOs manage over $1tn in revenue. APTD also has deep rooted relationships with the big four advisory firms in KPMG, Deloitte, PriceWaterHouseCoopers, and Ernst & Young. In 2019, APTD was added to the Financial Times list 1,000 fastest growing companies in Europe.

When the market crash occurred, Aptitude lost close to 60% of its share price value. Pre-crash prices were over 630p per share and at the height of the crash, APTD shares could be purchased for close to 250p. Since that low, its share price has increased over 70% and currently trades at 430p. I still consider this to be a cheap price for a software company that is growing rapidly with some excellent contracts in place.

Performance

At the end of July, APTD released interim results for the first six months of the year to 30 June. Despite the market crash and pandemic, Aptitude performed very well in my opinion. 

Being a software provider, subscription models are crucial in maintaining recurring revenue. APTD confirmed in the six-month period, annual recurring revenue was up 11% compared to the same period in the previous year. Software and subscription revenue had increased, as had overall revenue. Net cash levels had risen impressively by over 31% solidifying an already healthy balance sheet. Based on this, basic earnings per share went up by 9%. As a result of this, an interim dividend of 1.8p will be maintained by APTD.

My verdict

Aptitude Software is a seriously impressive company and a market crash bargain in my opinion. It has some excellent partnerships and provides products and services that are in high demand right now. Currently APTD has a presence in six countries and four continents. 

During a market crash, it can be easy to look for bigger names that offer similar types of products such as Sage. There’s nothing wrong with that approach, but I like to look for alternative rising stars. I would put Aptitude Software firmly in that category. I believe it is the type of stock  that you could pick up relatively cheap right now and could hold for a long time. If you like scouting the FTSE AIM for lesser known, high performing stocks, this could be one for you.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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