Atturra (ASX: ATA) is an IT contractor that aggressively acquires other companies using its shares as currency.
Atturra was briefly in the fictitious portfolio of government recommendations, as part of the proceeds from the takeover of Cirrus Networks (ASX: CNW) recommendations was paid in Atturra shares. That meant I found myself owning a stock I never intended to buy, and I later issued a sell recommendation at about $1 a share.
At that time I said:
That said, the broker’s highest estimate for “minor earnings per share” for fiscal 2025 is 6c, and 6.5c for fiscal 2026.
So even using the highest estimate for FY 2026, Atturra’s FY 2026 P/E ratio stands at 15.8. If we use the company’s fiscal 2024 “underlying NPATA” of $16.3m, the current underlying P/E ratio is 19.6. If we use diluted statutory earnings of 3.52 cents in fiscal 2024, the P/E ratio is 29.3.
In the end, broker analysts were almost right about FY2025. legal Earnings per share were flat at 2.6 cents per share, down from 3.6 cents in fiscal 2024. It was inferior in the eyes of no one but a management team that ran the gamut of fraud and their brutality. But it was enough to keep the share price above 70c for a while.
Things took a turn for the worse for Atturra, when in December 2025, it disclosed that one of its major contracts had expired early, leading the company to take a big profit in its H1 FY 2026 results.
As a result, the company lost nearly $4m in February. Of course, in presenting the results, Atura tried to perform a Jedi mind trick to get people to focus on underlying EBITDA as a measure of profitability.
But it didn’t work.
After the results were released, Atturra’s share price fell below 45 cents, before recovering slightly to the current Atturra share price of 48 cents per share.
The problem for the company was that underlying EBIDTA also fell by about 45% to $7.36 million. I would not put a value on this number, as it supports the regular costs of doing business such as share-based payments, and the cost of M&A. These expenses are not one-off but are actually incurred every year since the company is incorporated. You can see for yourself, below.
If we look at the actual accounts, we can see that the termination of the contract resulted in a real loss, with a loss of approximately $5.1 million in profit in the form of a “write-down of contract assets.” This means it was a deal with an acquired company, but either way, it shows that growth by acquisition is riskier than organic growth. The more often you buy other companies, the more likely you are to buy one right before you finally lose a deal.
Another expense that stands out in H1 FY 2026 Atturra results is higher interest expense.
This seems high as Atturra only has $27.3m of debt and the H1 FY 2026 figure of $2.46m includes $1.3m of “interest on deferred consideration” which, according to Note 4 of the accounts, did not occur in the prior period.
If we assume that interest rates will moderate in the future, and the company won’t need to write down any more to contract assets, you’d better believe that the company can return to profitability.
The company says it will achieve $30m of underlying EBITDA in fiscal 2026, which translates to more than $22m in the second half (more than three times the first half). It’s hard to know how this will translate into profits, but it’s fair to guess that the business could easily make $10m or more in profits if it spent less on acquisitions.
At the current share price, Atturra’s market capitalization is just under $180m, which is about 18x my conservative estimate of its sustainable profitability without the acquisition. It’s hardly impressive, but it’s also not a terrible price to pay.
However, I think the reason Atturra stock is a reasonable speculation is that analysts used the latest hiccup to lower their estimates for both fiscal 2026 and fiscal 2027 to more reasonable levels. Importantly, it also raised the possibility of a future fiscal 2027 estimate increase, perhaps following fiscal 2026 results.
More importantly, the company itself has net cash of over $20m, and is using that money to buy back shares. Its major shareholder and chairman Sean Shamsher has been buying shares at more than 50c a share on the Kanji market. As it has stakes worth more than $100m, the buyback itself is a meaningful show of confidence in the business’s prospects.
Interestingly, the business could also save a lot of money by paying off its $27 million debt with Westpac. It will also increase profits, and at current prices, if run conservatively, I can easily see the business justifying its cost.
However, I don’t expect that to happen. Because Atturra relies on issuing shares so that it has cash to buy back its shares at low prices and to pay for recurring acquisitions, the business has a strong incentive to increase promotional drives like core EBITDA in the market.
Fortunately for Atturra, brokers are happy to provide coverage given the potential for future capital gains required for such a roll-up strategy.
Finally, with its share price in the gutter, Atturra also looks like it may act like savvy venture capitalists and “focus on EPS, and invest in additional sales and solutions to drive market growth.” If it actually follows this plan, I can definitely see getting much better results than what I described above.
Typically, this type of business should be able to earn a 5% to 10% before interest and tax (EBIT) margin. The company is forecasting full-year revenue of at least $364m in fiscal 2026.
If, in FY 2027, it hypothetically paid off its debt and achieved a 5% EBIT margin on $360m revenue, that would be EBIT of $18m and net profit after tax (NPAT) of around $12.6m, with an FY P/E ratio of around 14.2, and none with weak margins.
If we model EBIT margins in FY 2024 and FY 2025, and assume an EBIT margin of 6.5%, and allow for a very modest 5% revenue growth in FY 2027, we get FY 2027 EBIT of around $24.8m. This would translate to an NPAT of approximately $17.4 million and an implied FY 2027 P/E ratio of below 10.5.
For any kind of growth company, I think the P/E ratio will definitely be very low. Even through dividends or buybacks, I would expect solid returns for investors over the long term, if these kinds of underlying financial results are achieved.
Of course, in reality, it’s more likely that the company will use any good results to boost its share price, so it can raise capital to fund new acquisitions! Overall, Atura stock looks like a favorable risk versus reward play as a short-term speculation. But as a long-term investment, this type of business always runs the risk of stacking melting ice cubes.
This happens when a business is in decline but continues to buy new businesses to make up for the lack of organic growth. If this is happening here, I guess Atturra’s legal conclusions will never be presented without “normalization”.
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Disclosure: The author does not own shares in ATA and will not trade ATA shares for 2 days after this article.. This article is not intended to be the sole basis for investment decisions. Any statements that constitute advice under law are general advice only. The author has not considered your investment objectives or personal situation. Any advice given is authorized by Claude Walker (AR 1297632), an authorized representative of Ethical Investment Advisers Pty Ltd (ABN 26108175819) (AFSL 276544).
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