Cortex Business Solutions gets second price target raise this month at Haywood

A strong third quarter has Haywood Securities analyst Pardeep Sangha raising his target on Cortex Business Solutions (Cortex Business Solutions Stock Quote, Chart, News: TSXV:CBX) for the second time this month.

On Tuesday, Cortex reported its Q3, 2017 results. The company earned $19,847 on revenue of $2.93-million, a topline that was up 22 per cent over the same period last year.

“As Cortex Business Solutions Inc. celebrates its 10th year trading on the TSX.V, as CBX, we also celebrate what I believe are far greater and more significant milestones; positive net income and positive cashflow from operations,” said CEO Joel Leetzow. “By achieving these milestones, we have become a legitimate business by anyone’s measure for the first time in our Company’s history. Reaching these goals speaks volumes towards the dedication and hard work put in by a streamlined Cortex team, as well as the continued faith our shareholders have shown us, which has helped us to build a strong future for Cortex. The growth in the commitment, drive and abilities of the individuals working for Cortex are driving forces in the results we are presenting today.”

Sangha says Cortex is experiencing growth within all key metrics, and has now posted three consecutive quarters of positive EBITDA. The analyst thinks the upswing in Cortex is just getting started.

“We believe Cortex is significantly undervalued,” Sangha says. “Cortex currently trades at 2.1x EV/Revenue multiple of our CY18 estimates compared to its peer group average trading at 4.1x EV/Revenue of consensus CY18 estimates.

In a research update to clients Wednesday, Sangha maintained his “Buy” rating, but raised his one-year price target on Cortex from $5.50 to $6.00, implying a return of 52.7 per cent at the time of publication.

“Our target price of $6.00 is based on applying a 3.6x EV/Revenue multiple of our FY18 forecast,” notes the analyst.

Sangha thinks Cortex will generate EBITDA of $400,000 on revenue of $11.1-million in fiscal 2017. He expects those numbers will improve to EBITDA of $1.4-million on a topline of $13.8-million the following year.

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