Endava (NYSE:DAVA)
5-Year Revenue CAGR: 20.80%
No of Hedge Funds: 16
Endava (NYSE:DAVA) is a technology services firm that specializes in IT services, including custom application development. The company also offers IT consulting, software development, and automation services to clients in finance, healthcare, and telecommunications.
In June, Endava (NYSE:DAVA) announced an expansion of its partnership with Google Cloud in the Asia Pacific (APAC) region. This collaboration aims to deliver and implement Google Cloud’s services, such as Generative AI, Cloud Migration, and Application Modernisation. By offering customers access to highly skilled software and data engineers, along with top-notch customer service, the partnership will provide tailored products and services across Google Cloud’s product suite. This expansion marks a significant step in Endava’s continued growth in Australia, New Zealand, and Southeast Asia, reinforcing its commitment to technical excellence in the region.
Endava (NYSE:DAVA) has a strong emphasis on custom application development, a high-growth sector in the IT services industry. With a consensus Buy rating from industry analysts, the stock has a target price of $37.30, which represents a 38.87% upside potential from its current level.
Endava (NYSE:DAVA) Full Year 2024 Results
Key Financial Results
Revenue: UK?740.8m (down 6.8% from FY 2023).
Net income: UK?17.1m (down 82% from FY 2023).
Profit margin: 2.3% (down from 12% in FY 2023). The decrease in margin was primarily driven by lower revenue.
EPS: UK?0.29 (down from UK?1.64 in FY 2023).
earnings and revenue growth
All figures shown in the chart above are for the trailing 12 month (TTM) period
Endava EPS Misses Expectations
Revenue was in line with analyst estimates. Earnings per share (EPS) missed analyst estimates by 32%.
Looking ahead, revenue is forecast to grow 12% p.a. on average during the next 3 years, compared to a 8.9% growth forecast for the IT industry in the US.
Endava stock 2025 forecast
After the latest results, the twelve analysts covering Endava are now predicting revenues of UK?804.6m in 2025. If met, this would reflect a notable 8.6% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to surge 33% to UK?0.38. Before this earnings report, the analysts had been forecasting revenues of UK?820.9m and earnings per share (EPS) of UK?0.60 in 2025. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a large cut to EPS estimates.
The average price target fell 11% to US$40.57, with reduced earnings forecasts clearly tied to a lower valuation estimate. That’s not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Endava at US$64.87 per share, while the most bearish prices it at US$30.10. So we wouldn’t be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Endava’s revenue growth is expected to slow, with the forecast 8.6% annualised growth rate until the end of 2025 being well below the historical 22% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 8.9% annually. So it’s pretty clear that, while Endava’s revenue growth is expected to slow, it’s expected to grow roughly in line with the industry.