Favouring Growth over Short-term Margin Boost
Esker Inc reported 19% y-o-y revenue growth for FY21, with 21% growth in operating profit and 20% growth in normalised diluted EPS. Profitability was below Edison Group’s expectations due to factors including higher sales commissions than expected, related to strong order intake, wage inflation and share-based payment-related taxes. The company continues to favour investment in sustained revenue growth over margin expansion. After a very strong run (up 103% last year, up 93% in 2020, five-year CAGR 28%) Esker’s share price has declined 53% year-to-date, in Edison’s view reflecting a more accurate understanding of the company’s growth strategy. The stock continues to trade at a premium to French software peers and at a discount to US SaaS peers.