Ahead of earnings, Steve Li maintains Top Pick rating on Tecsys

Tecsys CEO Peter Brereton: “We believe that we have the best supply chain execution suite on the market today and the market is beginning to agree with us.”Tomorrow morning Tecsys (TSX:TCS) will report its Q2, 2013 results.

The company is coming off Q1 results, reported September 6th, that sparked a rally in its shares. Tecsys’s revenue climbed by 28% to $11.5-million and the company’s board declared a semi-annual dividend of $0.035 per share

CEO Peter Brereton, said of those results: “We believe that we have the best supply chain execution suite on the market today and the market is beginning to agree with us.”

Industrial Alliance Securities analyst Steve Li, who notes that shares of Tecsys have gained 64% since the end of the last quarter, says there is no smoke and mirrors to what the company is accomplishing. Instead, he says, Tecsys’s rise is”largely the result of the consistent and robust earnings results, particularly in an uncertain macro economy.” In a research update to clients Tuesday, Li maintained his TOP PICK rating and $4.25 target on Tecsys.

Montreal-based Tecsys has developed a reputation as an innovator in the maturing supply chain management space. The use of supply chain management systems has become a way for smaller manufacturers to gain an advantage over competitors, but has become an absolute necessity for multinationals looking to stay competitive. A window into its supply chain can improve customer satisfaction, reduce excess inventory and the time between the manufacture of a product and its sale. Tecsys counts some of the largest companies in the world as clients. The company’s visual oriented radio frequency device, for instance, uses simple, intuitive visual cues to prompt the end user where to find the product on the shelf, which bar code to scan and how to package an order.

Li believes Q2 revenue will reach $10.5-million, up from $9.1-million in the same quarter last year. He says this will be driven by continued momentum in proprietary software and license sales, where he is estimating 25% year-over-year growth. The Industrial Alliance analyst says third party software licenses should increase 15%, while service revenue should grow to $6.6-million from $5.9-million last year.

At press time, shares of Tecsys were even at $3.65.