Up 104% in 2024, is this ASX 200 stock now overvalued?

S&P/ASX 200 Index (ASX: XJO) stock Technology One Ltd (ASX: TNE) has made its shareholders very happy this year.

How happy?

Well, on 2 January, you could have bought shares in the software company at intraday lows of just $15.27. In late morning trade today, shares are up 1.0%, changing hands for $31.18 apiece.

That sees the Technology One share price up 104.2% year to date.

Or enough to turn a $5,000 investment into $10,209.56.

For some context, the ASX 200 has gained 18.7% so far in 2024.

But following that meteoric rise, is it time to take some profits from this high-flying ASX 200 stock?

Time to sell this outperforming ASX 200 stock?

Despite its strong full-year results, Seneca Financial Solutions' Arthur Gallipoli believes the ASX 200 stock may have flown too high too fast (courtesy of The Bull).

"This software-as-a-service provider posted a strong fiscal year 2024 result," said Garipoli, who has a sell recommendation on Technology One shares.

As for those strong FY 2024 results, he noted, "Profit after tax of $118 million was up 15% on the prior corresponding period. Total revenue of $515.4 million was up 17%."

But Garipoli believes the soaring share price has been overdone.

"The shares have risen from $15.85 on May 17 to trade at $30.40 on November 28," he said.

Indeed, shares have continued to rise since 28 November, up another 2.6% at today's intraday level of $31.18.

According to Garipoli, "In our view, the shares have risen too quickly and are overvalued. The company is trading on a lofty price/earnings ratio. Investors may want to consider locking in a profit at these levels."

The ASX 200 stock trades at a price-to-earnings (P/E) ratio of around 84 times.

After this year's big share price surge, Technology One now commands a market cap of $10.2 billion.

What's been happening with Technology One?

Atop the strong metrics that Garipoli quoted for FY 2024, the ASX 200 stock also upped its full year dividend payout by 16% to 22.5 cents per share.

That represents a 62% payout ratio, and it sees Technology One shares trading at a slender, partly franked trailing yield of 0.7%.

Commenting on the strong full year results on 19 November, the day the company reported, CEO Ed Chung said:

Our ability to deliver these results is due to Technology One's clear vision, strategy, culture and our significant investment in R&D, which has been validated in March 2023 as we entered the ASX 100 index.

The ASX 200 stock closed up 10.1% on the day.

The post Up 104% in 2024, is this ASX 200 stock now overvalued? appeared first on The Motley Fool Australia.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Technology One. The Motley Fool Australia has recommended Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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