Business Overview
Learning Technologies Group Plc (LON: LTG) is an LSE listed company, engaged in the business of digital learning and talent management. The company provides digital transformation services to large organisations. The company is having its operations worldwide, which includes Canada, Hong Kong, Brazil, Australia, Germany, the UK and the US.

Recent News
On 28^th January 2020, the company announced that it had made an application for the admission of 8,400 new ordinary shares on AIM.

Trading Update - Financial Year 2019
On 21st January 2020, Learning Technologies Group Plc announced an update for trading for the full year ending 31st December 2019. The company expects its revenue to grow by approximately 38 per cent to nearly £130.0 million versus £93.9 million in the financial year 2018. The recurring revenues went up by 73 per cent for the period, driven by solid performance from Software & Platforms division and decent contribution from Watershed and PeopleFluent. The PeopleFluent generated a revenue of around $93.0 million in the financial year 2019, which is above the previously targeted value of $91.0 million. The growth was driven by Affirmity’s good sales performance and improved retention rate of software licences. The company’s adjusted EBIT stood ahead of the market expectations and is not below £41.0 million for FY2019 versus £26.0 million in FY2018. The increase was driven by synergies realised after integration of acquisitions and continued improved margins. The company’s net cash as on 31st December 2019 stood at £3.8 million, due to higher cash generation in the second half of the financial year. The company Content & Services and Software & Platforms businesses are having an active pipeline of acquisition opportunities internationally which will help in high growth in the future.

The company will announce its full-year results on 24th March 2020.

Share Price Performance

Daily Chart as on 12^thFebruary 2020, before the market closed (Source: Thomson Reuters)

On February 12^th, 2020, Learning Technologies Group Plc shares were trading at GBX 169.50 at the time of writing before the market close (at 10:53 AM GMT), down by 1.5 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 174/GBX 62.50. The stock price has given157.53 per cent returns during the previous year. In the last month, the stock price has given 25.52 per cent returns and now some profit booking is expected in the stock.

Valuation Methodology

*Peers: Aptitude Software Group Plc, Eckoh Plc, GB Group Plc, Ideagen Plc, Auto Trader Group Plc and Rightmove Plc

Conclusion
The company reported a decent financial performance in the fiscal year 2019. However, there are certain principal risks and uncertainties associated with the company business. Fluctuation in foreign exchange rates could affect the profitability of the company. Inability to cope up with the compliance with debt finance facility covenants could hamper its operations as well as its reputation. Some projects may overrun or may fail to meet specified timeline could hamper the revenue of the Group. Failure in cybersecurity and critical data breach could affect the operations of the company. The geopolitical and economic uncertainties in the United Kingdom as well as abroad has caused significant volatility in the market.

Presently, the company is trading near the 52-week high, raising doubts at its upside potential at the current price level. The company’s P/E multiple is significantly higher as compared to the industry multiple, reflecting overstretched valuations.

Based on the headwinds and the valuation methodology as done above, we have given a “Sell” recommendation at the current price of GBX 174.40 (as on 12th February 2020 before the market close at 8:03 AM GMT), based on 33.60x NTM Price/Earnings multiple (approx.) on FY20E earnings per share (approx.).
 
*All forecasted figures and Peer information have been taken from Thomson Reuters.

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