Sage: Revenue Growth on Track; Shares Overvalued

Narrow-moat Sage Group reported 10% total organic revenue growth in its first-quarter fiscal 2024 trading update with Sage business cloud's organic revenue up 18%. This is in line with our full-year growth expectations and the company's fiscal 2024 guidance, which was reiterated. Sage continues to expect organic total revenue growth in 2024 to be broadly in line with 2023 (10%), with operating margins expected to trend upward in 2024 and beyond. Specifically, Sage is expecting around a 50-basis-point to 100-basis-point improvement in the underlying operating margin in 2024. Shares were trading flat intraday. We don’t expect to make a material change to our GBX 880 fair value estimate. At current levels, the shares look overvalued.