The year of reckoning for Reckon

Accounting software firm Reckon (RKN) has bought itself a little more time with today’s earnings report that met subdued market expectations.

This was enough to keep the stock above water with a 1 cent gain to $2.15 during lunch time trade although the broader market was up 0.7%.

Management posted a 4% uplift in earnings before interest, tax, depreciation and amortisation (EBITDA) to $35.3 million on the back of a 1% increase in sales to $98.1 million for the year ended December 2013. Consensus estimates was counting on an EBITDA of $35.2 million and revenue of $99.6 million.

It has been well flagged that 2013 would be tough as it’s a transitional year for Reckon. The company is forging its own way without its partner, US accounting giant Intuit, and is investing heavily into its “cloud” offering to counter the threat of smaller and more nimble rivals like Xero (XRO).

Reckon will need to “show the money” this calendar year if it want to avoid a further caning from the market following its 11% fall from grace over the past 12-months.

The fact is that the stock is trading on a 2013 price-earnings multiple just north of 15 times, and that range is usually only reserved for those that can deliver double-digit earnings growth for the next period. Analysts have pencilled in around a 19% improvement in EBITDA and a 6% lift in sales for 2014.

Management has declined to give a guidance. Reckon is part of the Uncapped 100.