Small-cap ASX technology player Integrated Research Limited (ASX: IRI) has announced a rare acquisition which could help drive the group's future earnings growth. Investors reacted positively to the news, bidding the shares 2.7% higher to $1.705.
What happened?
Integrated Research, which provides businesses with performance monitoring and diagnostics software solutions, said that it would pay an initial US$1.5 million for IQ Services, which is a United States-based company that provides businesses with insight into their system performances, ultimately allowing them to enhance their customer service levels.
As it stands, IQ Services is only operating in North America but Integrated Research will expand its services into Europe and Asia, providing plenty of scope for growth. Integrated Research said: "(The acquisition) strategically positions Integrated Research to progressively expand into new technological markets… as well as leveraging our existing customers and markets with substantial new offerings."
The acquisition will be funded from existing cash reserves and is expected to be earnings per share (EPS) accretive (exclusive of amortisation of intangible assets and other non-cash items) for the 2016 financial year. In addition, Integrated Research may also be responsible for paying up to an additional US$3.5 million for the business based on its performance over the next three financial years.
What happens now?
Some investors will no doubt be deterred by Integrated Research's recent rally with the stock having surged more than 81% since the beginning of the year, heavily outpacing the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) in that time. However, Integrated Research still appears to be trading at a reasonable price and could actually be a great stock for investors going forward.
Before you buy Integrated Research however, there's another ultra-promising tech stock that needs your immediate attention (the stock is hovering near a 52-week low, making now the perfect time to buy!).
New: The Motley Fool's Top Stock for 2015 and Beyond
