Debt free with growing margins - we upgrade

For FY23, Corero delivered double digit annualised recurring revenue (‘ARR’) growth; we see this momentum continuing into FY24E and have upgraded our forecasts accordingly.

The retirement of all debt, including an inter-company loan, leaves the balance sheet ungeared and clean of FX movements which made reported margins historically volatile.

We see normalised EBITDA margins of 10%+ going forward and potentially rising further. The growth in revenues leaves the stock trading on a forward rating of only 1.8x EV/Sales. This stock has both defensive and growth qualities which should support a higher rating going forward and we reiterate our fair value of 14p price/share.