Sage Group Acquires Accounting System Automation Company Lockstep; Fair Value Estimate Unchanged

We maintain our fair value estimate for narrow-moat-rated Sage Group at GBX 630 per share following its acquisition of Lockstep and its third-quarter trading update for the period ended June 30, 2022. At current market prices, the shares look overvalued to us and are trading on a fiscal 2022 price/earnings ratio of 30, a ratio we do not believe is justified by Sage’s likely earnings growth rates. Management has updated its guidance for recurring revenue growth for the full fiscal year 2022 at 8% to 9%, toward the top end of its previous guidance range and in line with our estimates.