Many factors can push a stock into an overbought situation, though starting with a bullish momentum. Once overbought it opens the possibility of a pullback. The pullback to its fair value The retracement can have the potential of a price correction or time correction or both.
The price action after such retracement is most crucial. Besides alerting, such Overbought Stocks often give a chance to get an entry after minor corrections, if it is overall bullish.
Technology One Limited (ASX: TNE)
Technology One Limited (ASX: TNE) announced its half-year results for the period ended 31 March 2024, on 21 May 2024.
The company reported total revenue of $244.8 million, a 16% increase from the prior corresponding period (PCP). Total Annual Recurring Revenue (ARR) rose by 21% to $423.6 million in the half year. The SaaS business continues to grow robustly, with Profit After Tax for the half increasing by 16% to $48 million compared to the first half of FY23.
Net Revenue Retention (NRR), which measures the net amount of new ARR from existing customers, was 117% for the 12 months ending 31 March 2024. This was an outstanding result, considering that best-in-class in the ERP market is between 115% and 120%.
Given the Group’s strong financial performance in the first half of FY24, Technology One decided to pay a dividend of 5.08 cents per share for the half-year, an increase of 10% from the prior year. The company maintained a cash position of $103.2 million as of 31 March 2024.
TNE will continue to prioritize a strong operational focus on its R&D initiatives, with key investments planned for platforms such as SaaS+, App Builder, and the Digital Experience Platform (DXP). These investments aim to extend the functionality and capabilities of its global SaaS ERP solution. This strategy aligns with the company’s long-term goals to transition to a SaaS+ model, which will reduce the need for traditional long, complex, expensive, and risky implementations. This shift is expected to add substantial utility for customers while also enhancing value for Technology One by significantly de-risking its operations and enhancing economic viability.
Megaport Limited (ASX: MP1)
Megaport Limited (ASX: MP1) announced operational updates for Q3 FY2024, ending on 31 March 2024, on 29 April 2024.
The company while reporting strong revenue growth witnessed 30% year-on-year (YoY) increase to $49.5 million. EBITDA also showed promising growth, rising 92% YoY to $14.0 million.
The company experienced positive net cash flows during the quarter, increasing by $21.9 million YoY to reach $13.4 million. Megaport delivered a 50% YoY growth rate and had a cash position of $73.1 million as of 31 March 2024.
These results follow the promising half-year outcomes for Megaport in 1H FY2024, which ended on 31 December 2023. Annual Recurring Revenue (ARR) grew to $191.7 million in December 2023, a $43.4 million or 29% increase compared to December 2022. Gross profit for 1H FY24 was $66.6 million, up $20.1 million or 43% from 1H FY23.
Megaport is currently one of the Most Overbought ASX Stocks. It delivered a record EBITDA of $30.1 million in 1H FY24, an improvement of $26.7 million or 785% from an EBITDA of $3.4 million in 1H FY23.
The company's strong Annual Recurring Revenue (ARR) continues to support and complement these initiatives. Combined with efforts towards market expansion, these are expected to play a crucial role in driving revenue growth.
Commonwealth Bank of Australia (ASX: CBA)
On 19 July 2024, Commonwealth Bank of Australia (ASX: CBA) provided an update on a previous disclosure concerning legal proceedings served on ASB on 29 September 2021. The plaintiffs aimed to commence a representative (class action) proceeding against ASB in the High Court of New Zealand, pertaining to ASB's adherence to certain sections of the Credit Contracts and Consumer Finance Act 2003 (CCCFA).
This legislation mandates that variation disclosure must be provided when customers and ASB agree to modify loan agreements covered under the CCCFA. The Court of Appeal affirmed on 19 July 2024, the prior Court's ruling permitting the plaintiffs to pursue the action against ASB as an opt-out representative action.
Moreover, in June 2024, the Federal Court of Australia ruled in favour of CBA and dismissed the two class actions initiated against CBA in 2017 and 2018.
Additionally, Fitch recently raised CBA's Long-Term and Short-Term Issuer Default Rating by 1-notch to AA- and F1+, respectively. Moody's also increased CBA's adjusted baseline credit assessment by 1-notch, indicating CBA's robust financial metrics, which Moody's has evaluated as consistently superior or at the upper end of CBA's domestic peer group. It is now among the Stocks that are Overbought.
The company places a strong emphasis on broadening its digital services, with plans to launch CommBank app 5.0 and CommBank Yello, with the aim of improving customer satisfaction and the marketability of its products and services.
Source: Company’s Report
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