ProntoForms is undervalued, says Paradigm Capital analyst Leung

ProntoForms’ (ProntoForm Stock Quote, Chart, News: TSXV:PFM) third quarter results provided more evidence of the traction that the company is gaining in the potentially lucrative mobile forms market, says Paradigm Capital analyst Gabriel Leung.

On Monday, ProntoForms reported its Q3, 2014 results. The company lost $313,260 on revenue of $1.69-million, up 48% over last year’s third quarter topline.

“We are pleased with our third quarter and our continuing trend of increasing overall revenue,” said CEO Alvaro Pombo. “More importantly, we now have 17 consecutive quarters of increasing our recurring revenue base. Our year-to-date total revenue (nine months) has increased 55 per cent, and recurring revenue has increased 50 per cent over the comparable period last year. We have good momentum, and we are prudently increasing our spending rate to take advantage of the increasing number of opportunities available to us.”

Leung notes that ProntoForms third quarter results bested his expectations for both revenue and EBITDA. He says the results were more evidence that the company is executing against its plan and that it is in an excellent position to grab market share in the nascent mobile forms space. He points out that ProntoForms has established strong relationships with the likes of AT&T, Nextel, Rogers and Bell, and also has an opportunity to upsell its existing customer base of more than 2500.

“Our Buy thesis,” says Leung, “is predicated on our positive view of the company’s near-term growth prospects given the high ROI and stickiness associated with its SaaS-based mobile forms solution, the low rate of market adoption, its strong channel partnership with leading mobile carriers, along with the desirability of the company’s customer base and platform as a potential takeout candidate.”

In a research update to clients this morning, Leung reiterated his “Buy” rating and $0.70 one-year target on ProntoForms, implying a return of 75% at the time of publication.