Take a breather on red-hot Solium Capital, says PI analyst Sangha

Solium Capital (Solium Capital Stock Quote, Chart, News: TSX:SUM) has been on fire for a year, and the company’s share price is beginning to meet targets that once seemed lofty, says PI analyst Pardeep Sangha.

Yesterday, before market, Solium reported its Q2, 2013 results. The company earned $1.34-million on revenue of $15.6-million, a topline that was up 31% over the same period last year. The company beat the consensus revenue estimate of $15.1-million, but its EBITDA of $2.9-million fell short of the street’s expectation of $3.2-million.

Sangha notes that Solium’s revenue growth was driven by the recent acquisitions of pMX, OptionEase, Corporate Focus, andPCAT, but that these additions actually generated a loss in Q2.

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For Sangha, the overall impact of the quarter was mixed. He says he is not changing his revenue estimate for fiscal 2013, which is $66.3-million, but is slightly lowering his EBITDA forecast to $14.4-million.

In a research update to clients yesterday, Sangha raised his 12-month target price on Solium from $6.00 to $6.25, but maintained his NEUTRAL rating. Sangha reminds that Solium’s share price, which has raced from $1.60 last July to current highs over six dollars, is now bumping into his target price.

Sangha says he continues to have a positive outlook on Solium Capital’s business, as equity share plans are increasingly complex and the company is well positioned to make an impact on several global markets, after warapping up much of the Canadian market. He thinks Solium will post EBITDA of $19.3-million on revenue of $76-million in fiscal 2014.

At press time, shares of Solium Capital were up 1% to $6.16.

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