LONDON -- Sage Group
The bit that has the market's attention -- and sent shares down 3% to start the day -- is management's statement that the European growth it was anticipating in the second half hasn't shown itself yet. Unfortunately, as Europe shows few signs of strength as we move through summer, it seems unlikely this will change anytime soon.
Europe currently makes up nearly 60% of the FTSE 100
Pricey or not, it is acquisitions of this type that have largely separated Sage and fellow London-listed engineering software company Aveva
According to data from S&P Capital IQ, the IT sector has been the worst-performing sector over the past three months, down over 7% while the FTSE All-Share was essentially flat. While near-term economic pain may hurt earnings this year, many IT firms -- especially those focused on software -- have the cash flow to see them through this rough patch, and the push by companies to cut costs through automation and efficiency should provide strong growth for years to come.
While Sage's price-to-earnings ratio of 14.6 may not appear cheap, it is slightly below the average for the maligned IT sector. Opportunistic investors may want to look at Sage -- and others in the sector -- as a way to capitalize on the market's near-sightedness.
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Nate Weisshaar does not own any of the shares mentioned. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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