THREATS TO THE VALUATION
future growth of the company rests on its ability to acquire other software firms. A natural threat to its valuation would be the cost at which these acquisitions are consummated, as well as the assumption that there will be a suitable number of candidates for the company to acquire.
an inventory of skilled software engineers with specialised industry knowledge in order to compete. Outside of acquiring these skills from acquisitions, the labour market it draws from needs to have sufficient supply, at an acceptable cost, for the company to use. Specialised skills can become scarce and costly. implementation, and support of specialised SAP software. Despite only being included for three of the interim periods’ six months, the division recorded R28m in revenue (15% of total) and operating profit of R7.9m (40% of total). Operating profit margin was much higher than any other division at 28%.
At R6.18/share, t he company is trading on a 22.3 times price-earnings ratio. Of course, that hardly looks expensive when the company is growing earnings at 65% per annum. So the fundamental question is how long can the company continue delivering growth like this?