SSNC - Embedded Expectations Analysis - 2021 08 25
SS&C Technologies Holdings, Inc. (SSNC:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 17.5x Uniform P/E, implying bearish expectations for the firm. Although management's concerns about their growth rate, new product development, and cost drivers suggest the potential for near-term headwinds, market expectations are overly bearish, suggesting long-term equity upside is warranted.Specifically, management may lack confidence in their ability to sustain growth in DST,
their primary growth driver, as well as in their Intralinks business. Moreover, management may lack confidence in their ability to sustain share repurchases, continue to increase their dividend payments, and execute large acquisitions. They may also have concerns about further opportunities at insurance companies and general demand for on-premise deployments. Furthermore, management may be exaggerating the increased pace for software development and the degree to which higher costs were driven by FX headwinds, as opposed to other structural drivers. Finally, they may be downplaying concerns about their indirect dependance on central bank liquidity infusions.
Although management's concerns about their growth rates, the pace of software development, and increased costs suggest the potential for near-term headwinds, market expectations are still overly bearish given the firm's dominant market position. As such, long-term outperformance is likely warranted for SSNC.
SS&C Technologies Holdings is a holding company. Through its subsidiaries, the company is a provider of software products and software-enabled services that allow financial services providers to automate business processes and manage their information processing requirements. The company provides its solutions to clients principally within the institutional asset and wealth management, alternative investment management, financial advisory and financial institutions vertical markets. In addition, the company's clients include commercial lenders, real estate investment trusts, corporate treasury groups, insurance and pension funds, municipal finance groups and real estate property managers.
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