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Jack Henry & Associates Inc JKHY

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Morningstar’s Analysis

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Economic Moat




Jack Henry Continues Its Impressive Streak of Growth

Colin Plunkett, CFA Equity Analyst

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.

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Company Profile

Business Description

Jack Henry & Associates is one of the leading providers of core processing systems to domestic banks and credit unions. The company also provides ancillary products, such as Internet banking, check imaging, and remote deposit capture. Jack Henry serves about 1,200 banks and 800 credit unions.

663 Highway 60, P.O. Box 807
Monett, MO, 65708
T +1 417 235-6652
Sector Technology
Industry Information Technology Services
Most Recent Earnings Mar 31, 2020
Fiscal Year End Jun 30, 2020
Stock Type Classic Growth
Employees 6,402