The iSelect Ltd (ASX: ISU) share price has been amongst the worst performers on the market this morning following the release of its full-year results.
The price comparison company's shares fell as much as 21% in early trade. At the time of writing they have recovered and are down 14% to $1.74.
Here are the key takeaways from today's release:
- Revenue increased 8% to $185.1 million.
- EBITDA was up 33% to $28.6 million.
- EBITDA margin improved to 15.5% from 12.5%.
- Net profit after tax increased 27% to $16.4 million.
- Earnings per share was up 39% to 7.1 cents.
- Full-year dividend of 5.5 cents per share fully franked.
- Dividend Policy changed to 50% – 80% of reported NPAT.
- Outlook: Growth expected to continue in FY 2018.
All in all, I felt this was a very strong result from iSelect. Whilst revenue grew modestly, a big improvement in its margins led to strong bottom line growth.
A key driver of the solid profit result was its Health segment. The segment has now stabilised from its wobbles last year and posted a 50% increase in EBITDA on a 4% increase in revenue.
Elsewhere its Energy and Telco verticals continue to deliver. This segment posted annual revenue growth of 25% and EBITDA growth of over 70%. Furthermore, both verticals reported an increase in revenue per sale.
Perhaps the only disappointment was its Life & General Insurance segment. Whilst it was profitable during the year, a subdued performance led to flat revenues and suppressed margins.
So with profit growing strongly, a more generous dividend policy, and a positive outlook, why have its shares tumbled lower today?
Although earnings per share grew a whopping 39% to 7.1 cents, this actually missed a leading broker's full-year estimate.
According to a research note out of Credit Suisse in June, its analysts had forecast earnings per share of 8 cents and a full-year dividend of 4.5 cents.
Whilst its dividend beat the investment bank's forecast, it fell well short on earnings.
Should you buy the dip?
With its shares now changing hands at approximately 24x full-year earnings and providing a trailing 3.2% dividend, I think it is worth considering an investment in iSelect. Especially if it can deliver a similar level of growth in FY 2018.
In light of this, I would put it up there with Altium Limited (ASX: ALU) and Aconex Ltd (ASX: ACX) as a great option in the tech sector.
