Absolute Software is still undervalued, says Haywood

A solid third quarter has Haywood analyst Massimo Voci feeling bullish about Absolute Software (Absolute Software Stock Quote, Chart, News: TSX:ABT).

Last Thursday, Absolute reported its Q3, 2015 results. The company earned (U.S.) $2.79-million on sales contracts of $21.2-million, a 3% topline bump over the same period last year.

“These results demonstrate the progress we are making in our key strategic areas of focus,” said CEO Geoff Haydon. “We delivered consistent growth in our North American business, including the expansion of sales from existing accounts. Our Computrace data protection product line achieved double-digit growth, and our business within the corporate and health care verticals continued to expand. We also maintained our position as a dominant player in the education market.”

Voci says the company’s Adjusted EBITDA number of $6.8-million surpassed his expectation of $4.4-million, as did the company’s topline of $24.1-million, which was ahead of his estimate of $23.3-million. The analyst says the company’s refreshed management team is delivering strong cash flow and improving margins.

“We believe Absolute’s unique technology, strong cash flow, fresh perspective from new management and board changes, and the potential to rejuvenate growth with its sales reorganization efforts represent key reasons for investors to own Absolute at current levels,” he said. “While Absolute currently trades at below average EV-to-EBITDA multiples relative to its peer group, we believe it has the potential to trade at the higher end of the range in the near-to-mid-term with higher margins and improved growth, both of which we believe are achievable, particularly given the foreign exchange tailwind.”

In a research update to clients Friday, Voci maintained his “Buy” rating and one year target price of $11.75 on Absolute Software, implying a return of 22% at the time of publication.