Computer Modelling Group benefiting from foreign exchange tailwind, says Industrial Alliance

A weaker Canadian dollar will buttress the predictable growth of Calgary’s Computer Modelling Group (TSX:CMG), says Industrial Alliance Securities analyst Elias Foscolos.

Foscolos expects that CMG will report its Q2, 2016 results on Thursday, November 12. The analyst thinks the company’s revenue will improve on the back of a foreign exchange bump. He thinks the company will post net income of $0.11 a share on revenue of $21.7-million, in-line with the street consensus of $21.5-million.

Foscolos, who today reiterated his “Strong Buy” rating and one-year target price of $14.50 on Computer Modelling Group, says there are three major reasons for his bullish sentiment.

“(1) CMG has historically grown earnings, revenue and dividends at double-digit rates,” says the analyst. “While we forecast a substantial moderation in future growth, we strongly believe growth will continue at a more modest pace; (2) CMG has a low βe, in part due to its cash balance but also because the Company has a strong recurring revenue stream; and (3) CMG has been aggressively purchasing its shares in the market.”

Foscolos points out that one of the reasons for his high rating of CMG is because he believes that the cash on the company’s balance sheet and its diversified sources of revenue give it lower than average market risk.

Shares of Computer Modelling Group today closed down 3.4% to $11.98.