Morgans take on 1H17 earnings

Class is a fast-growing leader in the provision of administration and portfolio management tools for managers of Self-Managed Superannuation Funds.

Net growth in new SMSF accounts in the half-year was 15,365, an annualised growth rate of 27%, with Class estimating that it grew its market share of the SMSF administration market by 2.5% to 21.7%. This was reflected in strong first half revenues (up 31%) and growth in net profit up 28% to A$3.6m.

However Class isn't cheap, with investors being asked to pay +30 times earnings for this growth out to 2019. The Class share price had de-rated by over 30% since late 2016 in line with comparable high-PE growth stocks, so it was conspicuous that the stock has re-rated by over 20% since its result upon delivering comfort that high expectations are being met.

Amid a tumultuous few months for small-caps, we're encouraged that the market is still willing to recognise high-quality growth names, which are in scarce supply.

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