Euro Pacific Canada analyst Andrej Krneta says Solium Capital (TSX:SUM) is facing challenges in its business that are being masked by the benefit of a low Canadian dollar.
Tomorrow, after market close, Solium Capital will report its Q2, 2015 results.
Krneta says he is reassured by Solium Capital’s investment in organic growth, but says it growth profile still lags the company’s SaaS peers and is “in need of repair”. He says backing out foreign exchange gains from its U.S. business would likely reveal a company not yet enjoying double-digit growth.
“In Q215, we see FX, rollout in international markets, and trading revenue volatility driving results. Our forecasts point to a slowdown to high-single digit y/y revenue growth. On the other hand, we remain encouraged by the ongoing investment in organic growth in those end markets that show promise. But we remain cautious on the near-term impact on Solium’s overall growth profile that continues to lag those of its SaaS peers,” said the analyst, adding: “With no FX impact, US y/y sales (c. 48% of total) growth would likely remain in the single-digits.”
In a research update to clients today, Krneta maintained his “Hold” rating, but raised his one year target price on Solium Capital to $7.50 from his previous target of $7.20. He cites weakness in the Canadian dollar as the reason for the price target raise.