One growth stock I added to my holdings some time ago is Sage Group (LSE: SGE). It’s performed well since I bought the shares and I believe it can continue to do so.
Accounting software
Sage is a developer and distributor of cloud-based accounting software and programs for small to medium-sized businesses.
So what’s happening with Sage shares currently? As I write, they’re trading for 955p. At this time last year, they were trading for 726p, which is a 31% increase over a 12-month period.
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A growth stock performing well for my holdings
My position in Sage shares has been a fruitful one to date. I added the shares to my holdings close to 18 months ago. I bought the shares for 699p each. Based on current levels, my investment has grown by 36%, which is pleasing to see. I’ve also received some dividends too.
There’s a lot for me to like about Sage and I believe it can continue to grow and boost my holdings further. At present, it has a dividend yield of 2%. However, I do understand that dividends are never guaranteed.
Sage has a good performance track record which is pleasing to see for any growth stock. Further, its recent nine-month trading update for the period ending 30 June released a few weeks ago was excellent. Revenue as a whole increased by 10% compared to this time last year. All of its respective territories experienced revenue growth too.
Another couple of aspects that excite me about Sage are its business model and growth plans. The business is cash rich with a healthy balance sheet. It also has lots of recurring revenue through its subscription model. Furthermore, it commands high margins due to a lack of expenses such as raw materials or transportation, for example.
In terms of growth, the artificial intelligence (AI) boom is happening. Sage is already incorporating AI tools within its software, which means it could withstand any competition or issues arising from AI disruptors. For any growth stock, I want to see that a business is capable of keeping up with the times and staying ahead of the game. Sage is doing this, in my opinion.
Risks and my verdict
Right now, Sage shares look a bit expensive on a price-to-earnings ratio of close to 30. If any negative trading news were to be released, the shares could fall. Another issue is that in the software world, competition is rife and a newer, shinier competitor with a better offering could appear quickly, which could threaten Sage’s market dominance.
To conclude, I believe Sage is an excellent growth stock. It is performing well currently and I believe it will continue to do so for years to come. I’m happy with my position and plan on holding on to my shares for the long term, which I view as a five- to ten-year period.
