Majesco Stock Up 48% This Year But Opportunity on Horizon

Majesco Stock Up 48% This Year But A Buying Opportunity on the Horizon
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Majesco Stock: Insiders Have Been Choosing This Small Insurance Software Play

The healthcare sector will likely be a hot topic in the presidential debates, but while the battle lines are being drawn out, life goes on for insurance providers.

The insurance industry is highly competitive. Providers are always on the lookout for innovative ways to market their services to the marketplace.

Technology will help drive the insurance sector, specifically third-party software application developers such as small-cap Majesco (NASDAQ:MJCO).

The company provides software solutions and consulting services that enable insurance providers to better digitally market and service their services. Majesco does business with about 160 insurance companies worldwide in North America, Europe, and Asia Pacific.

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MJCO stock has been sizzling on the chart, trading at a 52-week and record high of $10.69 on July 9 and being up 48% this year.

Watch for this stock to hold its trend-line support around $8.00, which could be a good opportunity for investors on the price weakness.

Chart courtesy of StockCharts.com

While Majesco stock has already made a major upward move, its prospects remain high—albeit the stock will likely give up some gains after the recent bout of buying.

The Bull Case for MJCO Stock

Majesco is small, but the company has been steadily adding clients and driving up its revenues, turning profitable in fiscal 2019 (ending in March).

The revenue picture is encouraging, with growth in five consecutive fiscal years, from 2015 to 2019. Revenues went up by almost 80% from fiscal 2015 to fiscal 2019, representing a compound annual growth rate (CAGR) of 15.6%.

A concern for Majesco is the declining revenue growth rate that fell from 44.2% in fiscal 2016 to a mere one percent in fiscal 2018, prior to bouncing back by 14% in fiscal 2019.

Fiscal Year Revenue (Millions) Growth
2015 $78.7
2016 $113.5 44.2%
2017 $122.0 7.5%
2018 $123.3 1.0%
2019 $140.6 14%

(Source: “Majesco,” MarketWatch, last accessed July 11, 2019.)

Majesco generated positive earnings before interest, taxes, depreciation and amortization (EBITDA) in five straight years, surging by almost 450% in fiscal 2019.

Fiscal Year EBITDA (Millions)
2015 $1.0
2016 $0.04
2017 $4.7
2018 $2.7
2019 $15.0

(Source: Ibid.)

The following table shows the company’s generally accepted accounting principles (GAAP) diluted earnings per share (EPS) for the past few years. It demonstrates that Majesco managed to turn a profit in fiscal 2019 after recording four straight years of EPS losses.

Fiscal Year GAAP Diluted EPS
2015 -$0.02
2016 -$0.10
2017 -$0.02
2018 -$0.13
2019 $0.18

(Source: Ibid.)

Majesco’s balance sheet shows net cash of around $39.4 million. (Source: Majesco (MJCO),” Yahoo! Finance, last accessed July 11, 2019.)

Furthermore, the company returned to positive free cash flow in fiscal 2019, up 258.6% from fiscal 2018.

Fiscal Year Free Cash Flow (Millions)
2015 $2.91
2016 -$8.63
2017 $8.26
2018 -$3.82
2019 $6.05

(Source: MarketWatch, op. cit.)

Analyst Take

The demand for innovative solutions in the insurance segment will provide strong tailwinds for Majesco, especially as the company expands its solutions to the global market.

Insiders appear to be buying the bullish story about this company. Over the last six months, Majesco insiders purchased 4.7 million MJCO shares via nine transactions, while selling none of their shares. (Source: Yahoo! Finance, op. cit.)

The prospects for Majesco stock look encouraging and, given the jump in its share price, you may see a better entry point coming up if MJCO stock pulls back.