Is Agilysys (AGYS) a good buy?

Is Agilysys (AGYS) a good buy?

➡️ This is a step-by-step stock review to determine if Agilysys (AGYS) stock is a good buy. In this article, we’ll help you complete a 4M Confidence Booster. The 4Ms include the MOS (Margin of Safety), Meaning, Moat, and Management.

Table of Contents

  1. Agilysys Company History
  2. MOS
  3. Meaning
  4. Moat
  5. Management
  6. News
  7. 4M Summary
  8. Is Agilysys stock a good buy?

1. Agilysys Company History

➡️ Goal: It’s important to know the company’s history. This helps us understand the various revenue streams, if they acquired other companies, how they grew through difficult times, and how they separated themselves from the competition.

  • Agilysys, Inc. is a technology company specializing in software and services for the hospitality industry, including hotels, resorts, restaurants, and casinos.
  • The company was founded in 1963 as Pioneer-Standard Electronics, Inc., and initially, it focused on selling electronic components and systems.
  • In the 1970s, Pioneer-Standard Electronics expanded its offerings to include computer products and services, marking its entry into the IT industry.
  • The company changed its name to Agilysys, Inc. in 2003, reflecting its shift towards providing innovative technology solutions and services.
  • Agilysys has a rich history of serving the hospitality industry, and its solutions include point-of-sale (POS) systems, property management systems (PMS), inventory and procurement software, and workforce management tools.
  • Over the years, Agilysys has established itself as a trusted partner for various types of businesses within the hospitality sector, helping them streamline operations and enhance guest experiences.
  • The company has a global presence, serving customers in North America, Europe, and Asia, with offices and support centers in key locations worldwide.
  • Agilysys has a strong commitment to innovation, consistently introducing new products and features to meet the evolving needs of the hospitality industry.
  • In 2014, Agilysys launched its groundbreaking rGuest platform, a comprehensive suite of cloud-native solutions designed to provide a seamless and personalized guest experience.
  • Agilysys has also made strategic acquisitions to expand its portfolio and enhance its capabilities. Notable acquisitions include InfoGenesis, a leader in POS solutions for the hospitality industry, in 2010.
  • The company’s solutions are known for their scalability and flexibility, making them suitable for a wide range of hospitality businesses, from small independent hotels to large casino resorts.
  • Agilysys has received numerous awards and recognitions for its contributions to the hospitality technology space, solidifying its position as an industry leader.
  • The company places a strong emphasis on customer service and support, offering 24/7 assistance to ensure its clients’ systems run smoothly and efficiently.
  • Agilysys has played a vital role in helping hospitality businesses adapt to changing market dynamics, including the increasing demand for mobile and contactless solutions.
  • The COVID-19 pandemic presented new challenges to the hospitality industry, and Agilysys responded by enhancing its offerings to support safety and hygiene protocols while maintaining excellent guest service.
  • Today, Agilysys continues to be a driving force in the digital transformation of the hospitality industry, empowering businesses to thrive in an increasingly competitive and technology-driven landscape.
  • With a history spanning several decades, Agilysys remains dedicated to its mission of delivering innovative and reliable technology solutions that enable hospitality businesses to succeed and provide exceptional guest experiences.

2. MOS (Margin of Safety)

➡️ Goal: When you look at a stock, the first step is to look at the financials. Fortunately, Tykr does this step for us automatically. A stock is either classified On Sale (Potential Buy), Watch (Hold), or Overpriced (Potential Sell). The higher the score, the stronger the financials and the safer the investment. The higher the MOS, the higher the potential returns you can make. To determine if a stock is a definitive “Buy” or “Sell”, it’s wise to complete a 4M Confidence Booster.

  • Summary: On Sale
  • Score: 50/100
  • MOS: 90%
  • Share Price: $68
  • Fair Value: $418
  • Revenue: $198M

3. Meaning

How does Agilysys make money?

➡️ Goal: It’s important to know how a company makes money. A mature business model has multiple streams of revenue which allow the company to weather downturns in the economy.

Agilysys generates revenue through a variety of channels and services within the hospitality technology industry. 

Some of their top customers include Cambria Hotels and Suites, Camelback Resort, Calrio, Dave and Busters, Royal Caribbean, Millennium Hotels and Resorts, Comwell Hotels, Vale Resort, Virgin Hotels, and Chester Racecourse.

Here’s a breakdown of how Agilysys makes money:

1. Software Sales:

  • Agilysys offers a range of software solutions, including point-of-sale (POS) systems, property management systems (PMS), inventory and procurement software, and more.
  • Customers in the hospitality industry purchase licenses for these software products, providing a significant source of revenue.

2. Subscription Services:

  • Agilysys has transitioned to a subscription-based model for some of its software offerings.
  • Customers pay regular subscription fees to access and use cloud-native solutions such as the rGuest platform.

3. Maintenance and Support:

  • Agilysys provides maintenance and support services to its customers.
  • Customers pay ongoing fees for technical support, software updates, and troubleshooting assistance, ensuring their systems remain operational and up to date.

4. Professional Services:

  • Agilysys offers professional services, including implementation, training, and consulting.
  • Hospitality businesses often require assistance in setting up and optimizing their technology solutions, and they pay for these services.

5. Hardware Sales:

  • While Agilysys primarily focuses on software, it also sells hardware components such as POS terminals and peripherals.
  • Customers looking for integrated hardware and software solutions may purchase both from Agilysys.

6. Payment Processing:

  • Agilysys offers payment processing services, enabling customers to securely handle transactions within their hospitality operations.
  • The company earns fees for facilitating payment processing, including credit card transactions.

7. Managed Services:

  • Agilysys provides managed services to help hospitality businesses offload certain IT responsibilities.
  • This includes hosting and managing software applications in the cloud, which can generate ongoing revenue.

8. Mobile and Contactless Solutions:

  • With the growing demand for mobile and contactless technology in the hospitality sector, Agilysys offers solutions to enable digital guest interactions.
  • The company may charge fees for mobile app development and integration.

9. Additional Modules and Add-Ons:

  • Agilysys often offers additional modules and add-ons for its software products.
  • Customers can purchase these extensions to enhance functionality, such as loyalty programs or advanced reporting features.

10. Cross-Selling and Upselling:

  • Agilysys leverages its existing customer base to cross-sell and upsell its products and services.
  • As businesses expand or upgrade their technology needs, Agilysys offers opportunities for customers to invest in more advanced solutions.

11. Strategic Partnerships:

  • Agilysys partners with other technology providers in the hospitality ecosystem to offer integrated solutions.
  • These partnerships can lead to revenue-sharing arrangements or referral fees.

12. Licensing and Intellectual Property:

  • Agilysys may license its technology or intellectual property to other businesses, generating licensing fees and royalties.

13. Acquisition and Consolidation:

  • Through strategic acquisitions, Agilysys may absorb smaller technology companies in the hospitality sector.
  • This can expand its product portfolio and customer base, ultimately increasing revenue.

In summary, Agilysys generates revenue by providing a comprehensive suite of software solutions and associated services to the hospitality industry. Its diversified income streams include software sales, subscription services, maintenance and support, professional services, hardware sales, payment processing, managed services, mobile solutions, add-ons, cross-selling, partnerships, licensing, and acquisitions. This multifaceted approach allows Agilysys to cater to the evolving needs of its customers and maintain a strong presence in the hospitality technology market.

4. Moat

➡️ Goal: It’s important to understand who the competitors are and how their financials rank against this company. Try to find 5 other competitors to rank against based on Score. The best way to find competitors is to Google “XYZ competition” and replace XYZ with the company name. You can also go to Tykr and click on the “Similar Stocks” tab on each stock to see similar companies in the same industry.

Agilysys (AGYS)

  • Summary: On Sale
  • Score: 50/100
  • MOS: 90%
  • Share Price: $68
  • Fair Value: $418
  • Revenue: $198M

Competitors of Agilysys

Lightspeed Commerce (LSPD)

  • Summary: Overpriced
  • Score: 39/100
  • MOS: 0%
  • Share Price: $14
  • Fair Value: $17
  • Revenue: $548M

OppFi (OPFI)

  • Summary: Watch
  • Score: 78/100
  • MOS: 0%
  • Share Price: $2
  • Fair Value: $2
  • Revenue: $452M

Karooooo (KARO)

  • Summary: Watch
  • Score: 83/100
  • MOS: 0%
  • Share Price: $23
  • Fair Value: $23
  • Revenue: $3.5B

Immersion Corporation (IMMR)

  • Summary: On Sale
  • Score: 78/100
  • MOS: 85%
  • Share Price: $6
  • Fair Value: $26
  • Revenue: $38M

Descartes Systems Group (DSGX)

  • Summary: On Sale
  • Score: 83/100
  • MOS: 90%
  • Share Price: $74
  • Fair Value: $378
  • Revenue: $424M

Score Ranking

  1. Descartes Systems Group (DSGX) – 83/100)
  2. Karooooo (KARO) – 83/100
  3. OppFi (OPFI) – 78/100
  4. Immersion Corporation (IMMR) – 78/100
  5. Agilysys (AGYS) – 50/100
  6. Lightspeed Commerce (LSPD) – 39/100

5. Management

➡️ Goal: It’s important to understand who the CEO is, what they have accomplished in the past, and how they have helped this company grow. As investors, we should invest in CEOs with humility and integrity. Good leaders typically have stronger cultures, less turnover, and better returns in the stock market.

Ramesh Srinivasan made significant accomplishments during his tenure as the CEO and President of Agilysys, contributing to the growth and success of the company. Here are some of his most notable achievements:

1. Strategic Leadership:

  • Ramesh Srinivasan provided strategic vision and leadership to Agilysys, guiding the company through a period of transformation and growth in the hospitality technology sector.

2. Revenue Growth:

  • Under Srinivasan’s leadership, Agilysys experienced consistent revenue growth, driven by the expansion of its product offerings and increased market penetration.

3. Cloud-Native Solutions:

  • Srinivasan played a key role in the development and launch of the rGuest platform, a suite of cloud-native solutions designed to meet the evolving needs of the hospitality industry. This platform has been a significant milestone in Agilysys’ product portfolio.

4. Subscription Model Transition:

  • He oversaw the transition of Agilysys’ software offerings to a subscription-based model, aligning the company with industry trends and ensuring a recurring revenue stream.

5. Acquisitions and Integration:

  • Srinivasan led the acquisition of several strategic companies, including rGuest from Pioneer POS and Digital Alchemy. These acquisitions bolstered Agilysys’ capabilities and expanded its customer base.

6. Customer Focus:

  • During his tenure, Srinivasan maintained a strong customer-centric approach, emphasizing the importance of customer satisfaction and ensuring that Agilysys’ solutions met the specific needs of hospitality businesses.

7. Global Expansion:

  • He oversaw the company’s global expansion efforts, strengthening Agilysys’ presence in key markets in North America, Europe, and Asia.

8. Enhanced Support Services:

  • Srinivasan emphasized the importance of top-notch support and services, ensuring that customers received the necessary assistance to maximize the value of Agilysys solutions.

9. Financial Performance:

  • Agilysys achieved improved financial performance under Srinivasan’s leadership, with increased profitability and shareholder value.

10. Market Recognition:

  • Agilysys received industry recognition and awards for its innovative solutions and contributions to the hospitality technology sector during his tenure.

11. COVID-19 Response:

  • Srinivasan played a crucial role in guiding Agilysys through the challenges posed by the COVID-19 pandemic, adapting the company’s solutions to support safety and hygiene protocols in the hospitality industry.

12. Technology Innovation:

  • He championed technology innovation within the company, ensuring that Agilysys remained at the forefront of hospitality technology advancements.

13. Employee Engagement:

  • Srinivasan focused on building a strong company culture and engaged workforce, fostering collaboration and innovation among Agilysys employees.

14: Shareholder Value:

  • During his leadership, Agilysys delivered value to shareholders through stock price appreciation and improved financial results.

15: Sustainable Growth:

  • Srinivasan emphasized the importance of sustainable growth, positioning Agilysys for long-term success in the hospitality technology market.

In summary, Ramesh Srinivasan’s tenure as CEO and President of Agilysys was marked by significant accomplishments, including revenue growth, the transition to a subscription model, the development of the rGuest platform, strategic acquisitions, a strong customer focus, global expansion, and a commitment to technology innovation. His leadership contributed to the company’s continued success and its position as a leading provider of hospitality technology solutions.

Glassdoor Rating

Glassdoor Company Rating: 3.6

Glassdoor CEO Approval: 83%

6. News

➡️ Goal: It’s important to highlight important company-specific news as well as industry-specific news over the last month and year. We don’t need daily news on a company to make buy or sell decisions because we’re investors, not traders. Overall, we want sufficient news to understand where a company and industry are heading over the next year or few years.

This article from Zacks lists Agilysys as a strong stock because of the continued improvements to the net revenue and EPS. It’s important to highlight that Agilysys beat their latest earnings estimate by 63%.

7. 4M Summary

➡️ Goal: All of our homework on this company leads up to the 4M Confidence Booster. A lot of investors only look at the numbers. Yes, it’s important to look at the first M (MOS) which is the math part of investing but it’s also important to look past the numbers and also look at the business, the competition, and the management. If all 4Ms pass, we should have high confidence in buying this stock.

MOS: Agilysys’s financials are good. A score of 50/100 meets our minimum requirements for the overall financial strength of the stock but the impressive number is the 90% MOS. If you take a closer look at the financials, the net income and EPS become profitable in 2022 and the stock hasn’t slowed down since.

Meaning: The various revenue streams including POS, PMS, Professional services, transaction fees, hardware, and more make this a healthy business model. This gives Agilysys the ability to offer entry-level products and services to customers and then provide upsells to scale revenue.

Moat: There are a few competitors in the hotel and resort industries but Agilysys has secured an impressive list of customers. Once you can gain bigger names and leverage data that shows results, it becomes a lot easier to secure other big names. 

Management: Ramesh Srinivasan has an impressive track record with Agilysys and even prior to Agilysys, he served in leadership roles at other tech companies including Ooyala, Innotrc, and Bally Technologies. It’s also important to highlight his Glassdoor CEO approval is 83% which shows people do respect his leadership and how he leads the company.

8. Is Agilysys stock a good buy?

This is a not-so-glamorous fly-under-the-radar stock that may be a good addition to your portfolio. Although the stock has returned -11% for the year, it has returned 340% over 5 years. I don’t see the travel industry slowing down any time soon which means hotels and resorts will continue building more properties. As new properties are built, Agilysis will continue to expand revenue.

The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.

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