Analyst Note| Colin Plunkett, CFA |
Jack Henry’s wide moat was on full display this quarter, as the coronavirus appears to be having only a modest impact on the company. For the quarter, the company generated sales of $429.4 million, representing growth of 13% from the previous year. Excluding the company’s deconversion fees, Jack Henry generated year-over-year top-line growth of 9%. This quarter’s strong top-line performance led the company quarterly earnings of $0.96, an improvement of nearly 25% from a year ago. Some of this improvement is attributable to a significant jump in one-time deconversion fees Jack Henry charges customers when the company loses a customer. Nevertheless, excluding deconversion fees, the company continues to generate impressive organic growth significantly outpacing its competitors. We’ll be adjusting our near-term forecasts to reflect this quarter’s outperformance. Nevertheless, we do not expect any material changes to our fair value estimate of $131 per share. Jack Henry is a solid company whose moat is arguably growing in this environment. However, shares trade at more than 44 times fiscal 2020’s forecast earnings which we regard as expensive.