Buying quality FTSE 100 stocks during periods of deep pessimism has historically rewarded patient investors with exceptional long-term returns.
Sage Group (LSE: SGE) has delivered consistent double-digit earnings growth for years, barring a brief disruption during the pandemic, making it one of the Footsie’s most reliable compounders.
The stock has fallen 33% since January 2025, driven largely by market fears that artificial intelligence could erode or replace the company’s core software offerings.
However, a growing number of seasoned investors believe those fears are fundamentally misplaced, and that the sell-off has created a rare entry point into a high-quality business.
Nick Train, manager of Finsbury Growth and Income Trust, has gone on record arguing there is a “once-in-a-decade opportunity to access exceptional growth assets at fundamentally the wrong price.”
Train has backed that conviction by holding Sage as Finsbury’s joint-third largest position, signalling serious confidence in the stock’s long-term prospects at current valuations.
Sage provides software that helps small and medium-sized businesses manage finance, payroll, and HR operations, areas the company itself describes as those “where accuracy and compliance are non-negotiable.”
CEO Steve Hare has argued that in an agentic AI world, trusted systems of record like Sage become more critical, not less, with AI depending on such platforms to reason and act effectively.
Hare noted that “AI-powered features are now available to over 500,000 customers across the group, helping finance teams accelerate cash flows, close the books faster, and confidently turn insight into action.”
In the six months to 31 March, Sage reported a 16% rise in underlying earnings per share, with revenue climbing 11% to £1.36bn alongside meaningful profit margin expansion.
Underlying annualised recurring revenue rose 11% to £2.73bn across all geographic regions, while the renewal rate by value hit 102%, reflecting stronger sales to existing customers and growing AI feature adoption.
The company is also using AI internally to drive productivity improvements across the business, adding another layer of margin expansion potential over the medium term.
Beyond artificial intelligence, the UK government’s Making Tax Digital initiative represents a further structural tailwind that could accelerate customer migration toward Sage’s cloud-based platforms.
The most credible near-term risk remains economic weakness, particularly in North America, which is Sage’s largest market and most vulnerable to a slowdown in small business spending.
Despite that risk, the stock now trades at just 15 times next year’s forecast earnings, a strikingly low multiple for a high-margin software business still growing at between 9% and 15% annually.
A £300m share buyback programme launched in March is underway, bringing the total announced in the first half to £600m, a move that is earnings accretive and supportive of the share price.
Shareholders also benefit from a well-covered forward dividend yield of 2.8%, providing meaningful income support while investors wait for sentiment to recover.
With strong recurring revenues, deepening AI integration, regulatory tailwinds, and a valuation that appears to undervalue the business significantly, the bull case for Sage looks increasingly compelling in 2026.