Autonomy, the data search specialist, is set to rejoin the FTSE 100 next month.
Currently in second place on the FTSE 250, Autonomy’s strong financial performance and a string of large contract wins recently make it a hot favourite to move up to the premier league when the top slots are reviewed on 10 September. Any changes will come into effect the following week.
Last month, Autonomy posted revenue growth of 72 per cent to $125.6m (£67.3m) for its second financial quarter and profits before tax of $50.4m, beating even the revised analyst expectations. George O'Connor, an analyst at Panmure Gordon, said. "We would expect another earnings upgrade just on the back of the contract wins."
The group's stock closed at 1143p on Friday, up 8.3 per cent in the day to a 52-week high. Over the week the shares rose some 11 per cent following an upgraded "buy" rating from Panmure.
But the high price is not just down to the favourable predictions – its shares have been trading at £10 and above since early July.
"There are a number of buyers that are coming in, in anticipation of Autonomy joining the top person's club, so the stock is moving up strongly and there is a volume of trade," Mr O'Connor said. "Once it is into the FTSE 100, the index buyers will get involved, pushing the price up again, so quite a few of those going along for the ride will make a nice profit."
Autonomy first entered the FTSE 100 in December 2000, but it dropped out of the blue-chip club after the bursting of the technology bubble.
The software industry as a whole has so far proved broadly resilient to the slowdown affecting some sectors of the economy. Mr O'Connor said. "You can see the consumer-driven and financial service verticals having a pretty bad time, whereas the news from companies like Autonomy and Logica is positive."
Autonomy, whose chief executive and founder is Mike Lynch, is doing particularly well because its speciality – detailed searching of unstructured data such as emails – looks particularly attractive as the regulatory burden on business rises.
Richard Holway, a software industry expert, said: "If you think of everything that has happened in the past year, with the credit crunch and the rogue trading scandal at SocGen, Autonomy really has been the company that can really meet companies' requirements to very quickly work out if something is going wrong."Reuse content