Jack Henry & Associates, Inc.
Jack Henry & Associates, Inc. (NASDAQ: JKHY) is a leading provider of technology solutions and payment processing services for the financial services industry. Jack Henry Banking, Symitar, and ProfitStars are the three business brands JKHY distributes its products and services. Its operating segments are 1) Services and support income, comprising private and public cloud fees, product delivery and services, and on-premises support fees, and 2) Processing revenue, consisting of remittances, card fees, and transaction and digital revenues. SilverLake, CIF 20/20, Core Director, and Episys are JKHY's core software solutions.
Why Should Investors Book Profit?
- Weak Liquidity Profile: The company's current ratio at the end of Q2FY22 is 1.25x, compared to the industry median of 1.59x. This implies relatively lackluster liquidity profile against the industry median.
- Increase in Debt: JKHY Debt/Equity ratio at the end of Q2FY22 is 0.19x increased from 0.05x at the end of Q1FY22, implying a higher balance sheet risk.
- Margin Stress: The company reported gross margins of 42.7% in Q2FY21 (ended December 31, 2021) compared to the industry Median of 51.7%, indicating significant stress on the topline performance. The company's net margin fell to 19.4% in Q2FY22 vs. 20.9% in Q1FY22.
- Technical weakness: On the daily chart, JKHY’s prices are trading below the horizontal trend line and facing resistance of the same. Moreover, the momentum oscillator RSI (14-period) is trading at ~61.36 level, reversing from the higher levels. However, On the daily charts the prices are trading above the trend-following indicators 21-period and 50- period SMA, which may act as a support level for the stock. An important support level for the stock, is placed at USD 160 while the key resistance level is placed at USD 195.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation
(Analysis by Kalkine Group)
* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation:
JKHY's share price has inclined 16.48% in the past three months and is currently leaning towards the higher band of the 52-week range of USD 146.10 to USD 179.98. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 154.96.
Considering the company's increased debt, weak liquidity profile, stress in margins, current valuation and associated risks. We recommend a "Sell" rating on the stock at the closing price of USD 176.05, up 3.52% as of February 25, 2022.
Three-Year Technical Price Chart (February 25, 2022). Analysis by Kalkine Group
* The reference data in this report has been partly sourced from REFINITIV.
* All forecasted figures and industry information have been taken from REFINITIV.
Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.
Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.
There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.
You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.
The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.
Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.
Please also read our Terms & Conditions and Financial Services Guide for further information.
On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.
Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.