Through a buy and build strategy, Learning Technologies Group PLC (LON:LTGL) has established a distinctive international position in corporate e-learning with a broad range of software and service offerings. LTG has been growing apace and profit margins have been rising strongly. The recent acquisition of LMS provider NetDimensions is the last major piece in the technological jigsaw. Attractive growth drivers and synergies from the NetDimensions acquisition put the company in a strong position to generate positive surprises. Given these factors, the c 23x our FY18 EPS is not demanding and our DCF analysis indicates upside potential of 43% to 103%.
Investment case: e-learning consolidator
LTG is consolidating the corporate learning technologies space, having made six acquisitions since it joined AIM in 2013. The corporate e-learning industry is growing at rates in the mid-teens supported by a structural shift to online/blended learning. LTG has benefited from its increased scale and profit margins have been rising. The recent investment in software platforms is boosting earnings quality and margins should continue to move higher. Following the NetDimensions deal, more than 40% of revenues are recurring in nature, up from 10% in FY14.
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