Yesterday, Solium reported its Q3, 2015 results. The company earned $2.28-million on revenue of $22.5-million, a topline that was up 20% over the same period last year.
Sangha notes that the company beat the consensus revenue estimate, but slightly missed on consensus Adjusted EBITDA, coming in at $3.9-million against consensus of $4.1-million. The company beat both Sangha top and bottom line estimates. The analyst believes better things are on the horizon for Solium as its increased investments into international markets has compressed margins in 2015, but should result in higher revenue and increased customer acquisition next year.
“We believe Solium is currently undervalued,” says Sangha. “We compared Solium to a peer group of other Canadian Software and Services companies with an Enterprise Value of between $50M and $1.2B. Solium is currently trading at a 17.8x EV/EBITDA multiple of our FY15 estimates and a 12.7x EV/EBITDA multiple of our FY16 estimates, compared to its peer group which is trading at a 19.9x and 15.7x respectively. Given Solium’s consistent track record of both topline growth and strong Adj. EBITDA margins, high recurring revenue base, and the large global market opportunity ahead, we do not believe the discount to the peer group is warranted.”
In a research update to clients today, Sangha maintained his “Buy” rating on Solium Capital, but increased his one-year price target on the stock from $9.00 to $10.00, implying a return of 29.9% at the time of publication.
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