Tecsys gets price target raise at Paradigm

Yesterday, Tecsys reported its Q1, 2015 results. The company earned $343,000 on revenue of $13-million, up 23% from the $10.6-million topline the company posted in the same period last year.

“This quarter we further extended our leadership in the hospital market, signing three notable new health systems and highlighting the industry’s growing demand for our products,” said CEO Peter Brereton. “Along with the momentum we have established in the hospital sector, we also booked an additional $4.0-million of business in the broader supply chain market. Our services team continues to execute with increased efficiency, reflecting the improvements we made to their organization and capacity over the last two years. With the acquisition of Logi-D completed, we are now working on integrating their products and capitalizing on the new opportunities available to us to accelerate our growth.”

Leung says the quarter beat his expectations on both the top and bottom line and he notes that all key metrics showed year-over-year improvement. He says his investment thesis -that Tecsys has strong domain expertise that differentiates it from its competition and will allow it to pursue a “very significant” market opportunity in the healthcare vertical- was further confirmed.

Following the results, Leung has raised his estimates on Tecsys slightly. He now believes the company will generate EBITDA of $4.9-million on revenue of $54.1-million in fiscal 2015 and EBITDA of $7.9-million on a topline of $62.1-million in 2016.

In a research update to clients this morning, Leung maintained his “Buy” rating on Tecsys, but raised his one-year target price on the stock from $10.00 to $11.00, implying a return of 40% at the time of publication. This new target, he explains, is based on 15x his estimate of the company’s fiscal 2016 EV/EBITDA.