TechnologyOne (ASX:TNE) has established itself as one of Australia’s premier Software-as-a-Service (SaaS) businesses, consistently delivering solid growth and profitability. The TechOne share price has added a further 1.98% today, moving back in sight of highs ($42.88) at $41.15 after a mightily impressive rally that has now extended to 124.5% over the past 12 months. But as its valuation rises, and the company now sits with a market cap of $13.47billion, can this SaaS juggernaut continue its upward trajectory, or is it starting to look expensive?

Founded in 1987, TechnologyOne has evolved from an on-premise enterprise software provider into a pure-play SaaS business. This transition, completed over the last decade, has driven a powerful shift in its financial profile with recurring revenue now making up over 90% of total revenue. Importantly, churn is also very low, thanks to mission-critical software for government, education, and local council clients. The platform is also scalable, thanks in part to cloud delivery, meaning new customers add little incremental cost to operations.

The company’s most recent financial results (ending March 2025) offer a clear take on why the market seems to love the business:

  • Annual Recurring Revenue (ARR) up 21% to $511.1m.
  • Total revenue up 19% to $291.3m for the half.
  • Net Profit After Tax (NPAT) up 31% to $63.0m.
  • Dividend per share up 30% to 6.6c.

Despite stellar results, TechnologyOne now trades at a premium: over 50x trailing earnings and around 13x sales. This reflects its quality and growth, but leaves little room for error if growth slows or competition intensifies.

Analysts price targets on the stock have been outpaced in recent months, with the average target on the street of $36.22 considerably below current price action. The high of $45, set against a low of only $18 highlights some of the gap that exists between the bull and bear camps.

 

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TechOne shares had pulled back from recent highs, with a 5% breather before today’s action, yet it appears that support was found at $40, and bulls may be looking to retest highs before long. Momentum is on side, yet that valuation question continues to poke it’s head.

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