Analysts believe there is substantial share price upside on the cards at Auction Technology (ATG), the digital auction marketplace that is primed to post its first full year of profitable growth for the 12 months to 30 September 2023.

Consensus forecasts may have been trimmed this year, largely because of currency headwinds and the delayed launch of its atgPay feature, yet the anticipated £36.4 million net profit would still smash last year’s £6 million loss, based on Stockopedia data.FTSE 250 constituent Auction Technology runs an online platform that helps connect auctioneers with a global pool of bidders, including businesses and private collectors. The company operates across multiple marketplace brands, including The Saleroom, i-bidder, Proxibid and separate Bidspotter marketplaces in the US and UK.

A wide selection of goods is auctioned, including art and antiques, returned and surplus consumer product and industrial equipment, where there are large secondary markets for farm, manufacturing and other heavy industrial bits of kit.

This is a market that was already being transformed by the internet, a switch that has been hastened by Covid. Auctions can be online-only or combined with a live auction. Auction Technology charges commission fees that range from 3% to 5% of the selling price struck on lots, plus a fee on vendors to place their stock on its marketplace.

Analysts see reasons to be optimistic, including more revenue coming from value-added services and the potential to drive more bidders on its platform via investments in search engine optimisation, text messages and other new marketing features, such as its payment processing platform atgPay, which has now launched across its Proxibid platform, which can combine with other pay services to make payments easier for buyers.

Although past company financials are muddied by previous acquisitions and a period under private equity ownership, more clarity from its figures this year and in the future should reveal the intrinsic value analysts believe exists within the business.

According to Numis, operating profit margins will exceed 40% this year and stay there as the company levers its powerful market position. This should help earnings growth outstrip sales progress in the high teens.

CFP SDL Free Spirit Fund (BYYQC27) holds Auction Technology in its portfolio, flagging an inflection point for return on equity that has been depressed by historical acquisition premiums paid. Fund manager Keith Ashworth-Lord expects this to unwind and start to inflect upwards given the very high incremental returns generated from organic growth and highly cash generative nature of the business.

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