We reiterate our Sell rating, but raise our DCF-derived fair value to 555p from 550p as we up our adj. EPS ests. by 1%. Growth momentum is there, and cost savings should allow Sage to exceed an op. margin of 28.5% in H2 FY16. However, such a 2ppt margin increase is not extrapolable to FY17 as part of the GBP50m cost savings will be reinvested in marketing. Despite yesterday’s share price decline, Sage’s demanding valuation multiples create no positive catalyst for the stock, in our view.
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