Atturra (ASX: ATA) is an IT contractor that aggressively acquires other companies using its own shares as currency.
Atturra briefly existed within the hypothetical portfolio of official recommendations, because part of the proceeds from the takeover of recommendation Cirrus Networks (ASX: CNW) were paid in Atturra shares. This meant I found myself owning a stock I had never intended to buy, and I subsequently issued a sell recommendation at around $1 per share.
At the time I said:
That said, the highest broker estimate for ”normalised earnings per share” for FY 2025 is 6c, and for FY 2026 is 6.5c.
So even using the highest estimate for FY 2026, Atturra is on a FY 2026 P/E ratio of 15.8. If we use the company’s FY 2024 “underlying NPATA” of $16.3m, the current underlying P/E ratio is 19.6. If we use FY 2024 diluted statutory earnings per share of 3.52 cents, the P/E ratio is 29.3.
In the end, the broker analysts were roughly right about FY 2025, though statutory earnings per share were far lower at 2.6 cents per share, down from 3.6 cents in FY 2024. That was lacklustre in the eyes of anyone but a management team spouting delusion and their sycophants. But it was enough to keep the share price hovering above 70c, for a while.
Things went totally awry for Atturra, when, in December 2025, it disclosed that it had a large contract terminated early, which would lead to the company taking a big profit hit in the H1 FY 2026 results.
Consequently, the company reported a loss of about $4m in February. Of course, in presenting the result, Atturra attempted to perform the Jedi mind trick of telling people to focus on underlying EBITDA as a measure of profitability.
But it didn’t work.
After the results were released, the Atturra share price crashed to below 45 cents, before recovering slightly to the current Atturra share price of 48 cents per share.
The problem for the company was that even underlying EBIDTA was down about 45% to $7.36 million. I woudn’t put any value on this number whatsoever, as it backs out regular costs of doing business such as share-based payments, and M&A costs. These costs are not one-off but in fact have occurred every year since the company listed. You can see for yourself, below.
If we look at the actual accounts, we can see that the contract termination did the real damage, with a hit to profit of around $5.1m in the form of a “write down of contract assets”. This implies that this was a contract with an acquired company, but either way, it shows how growth by acquisition is riskier than organic growth. The more you often buy other companies, the more likely you are to eventually buy one right before it loses a contract.
The other expense that stands out in the H1 FY 2026 Atturra results is the elevated interest expense.
This seems high since Atturra has only about $27.3m in debt and the H1 FY 2026 figure of $2.46 million includes $1.3m “interest on deferred consideration” that did not occur in the prior corresponding period, per note 4 of the accounts.
If we assume that the interest costs will moderate in the future, and that the company will not have to make further write-downs to contract assets, then you would certainly believe that the company can bounce back into profitability.
The company says that it will achieve $30 m underlying EBITDA in FY 2026, which implies over $22m in the second half (more than three times as much as the first half). It is hard to know how that will translate to profit, but it would be reasonable to estimate that the business could easily make a profit of $10m or more if it simply spent less money pursuing acquisitions.
At the current share price, Atturra has a market capitalisation of just under $180m, which is about 18x my conservative estimate of its sustainable profitability without acquisitions. That’s hardly impressive, but it isn’t a terrible price to pay, either.
However, the reason I think Atturra stock is a decent speculation is that analysts used the latest hiccup to decrease their estimates to a more reasonable level, for both FY 2026 and FY 2027. This makes near-term disappointment less likely (albeit still possible). Importantly, it also increased potential of increasing FY 2027 estimates in the future, perhaps after the FY 2026 results.
More significantly, the company itself has net cash of more than $20m, and is using that money to buy back shares. Its major shareholder and Chairman, Shan Shamsher Kanji, has been buying shares on the market at over 50c per share. Since he has an interest in over $100m worth of shares, the buyback itself is also a meaningful display of confidence in the prospects of the business.
Interestingly, the business could also save a considerable amount of money simply by paying off its ~$27m loan with Westpac. That would also boost profit, and at current prices, I could easily see the business justifying its price if conservatively run.
However, I am not expecting that to happen. Since Atturra relies on issuing shares so that it has cash for buying back its own shares at lower prices, and paying for frequent acquisitons, the business has a huge incentive to tout promotional drivel like underlying EBITDA to the market.
Fortunately for Atturra, the brokers are happy to provide coverage, given the likelihood of the future capital raisings required for such a roll-up strategy.
Finally, with its share price in the gutter, Atturra is also sounding like it might act like sensible capitalists and “focus on EPS, and invest in additional sales and solutioning to achieve above market growth.” If it actually delivers on that plan, I could definitely see it achieving much better results than I outlined above.
Generally speaking, this kind of business should be able to make earnings before interest and tax (EBIT) margins of 5% to 10%. The company is forecasting full-year revenue of at least $364m in FY 2026.
If, in FY 2027, it hypothetically paid off its debt and achieved 5% EBIT margins on $360m in revenue, then that would be EBIT of $18m and net profit after tax (NPAT) of around $12.6m, implying a FY P/E ratio of around 14.2, even with weak margins and no growth.
If we model EBIT margins on FY 2024 and FY 2025, and assume an EBIT margin of 6.5%, and allow for very modest 5% revenue growth into FY 2027, we would get FY 2027 EBIT of about $24.8m. That would translate to NPAT of about $17.4m and an implied FY 2027 P/E ratio of below 10.5.
For a company with any growth whatsoever, I think that P/E ratio would definitely be too low. Even via dividends or buybacks, I would expect a solid return to investors over the long term, if those kind of fundamental financial results were achieved.
Of course, in reality, it is more likely the company will use any good results to hype its share price, so it can raise capital, to fund new acquisitions! Overall, Atturra stock does look like a favourable risk versus reward play, as a short term speculation. But as a long term investment, this kind of business always risks stacking melting icecubes.
That occurs when a business is declining but it keeps buying new businesses to cover up the lack of organic growth. If that is occurring here, then my guess is Atturra’s statutory results will never once be presented without “normalisation”.
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Disclosure: The author does not own shares in ATA and will not trade ATA shares for 2 days following this article. This article is not intended to form the sole basis of an investment decision. Any statements that are advice under the law are general advice only. The author has not considered your investment objectives or personal situation. Any advice is authorised by Claude Walker (AR 1297632), Authorised Representative of Ethical Investment Advisers Pty Ltd (ABN 26108175819) (AFSL 276544).
The information contained in this report is not intended as and shall not be understood or construed as personal financial product advice. You should consider whether the advice is suitable for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement. Nothing in this report should be understood as a solicitation or recommendation to buy or sell any financial products. A Rich Life does not warrant or represent that the information, opinions or conclusions contained in this report are accurate, reliable, complete or current. Future results may materially vary from such opinions, forecasts, projections or forward looking statements. You should be aware that any references to past performance does not indicate or guarantee future performance.