In the shadow of a resurgent technology sector, most Canadian tech juniors went nowhere in 2015. That, of course, is a place that is better than their mining counterparts, who found the bottom and proceeded to dig. Things aren’t all rosy though: the TSX tech index’s little brother is still littered with stocks that are illiquid or less than a dime. But there were some bright spots, including a few triple-digit gainers.
The 2015 Cantech Letter Awards, which will be presented at a gala dinner following the Cantech Investment Conference on January 26, will see six awards handed out; TSX Tech Stock of the Year and Tech Executive of the Year and the mirror awards for the TSXV, plus an award for Canadian Life Sciences Stock of the Year and Canadian Cleantech Stock of the Year.
The model for the Cantech Letter Awards has always been the same: we call on the analysts who cover Canadian tech to vote. This year, we had more than two dozen of them vote, from firms of various sizes. For the technology sectors, each analyst submits three choices in each of four categories. The analysts then rank the consensus choices.
Here are the three finalist for 2015 TSXV Tech Stock of the Year, listed in alphabetical order…
AcuityAds (AcuityAds Stock Quote, Chart, News: TSXV:AT)
In November, a better than expected third quarter had Paradigm Capital analyst Spencer Churchill feeling bullish about AcuityAds. “The company has made great strides toward positive EBITDA, with another quarter of materially reduced EBITDA losses, as it continues to benefit from the combination of robust revenue growth and reduced costs,” said the analyst. “With positive EBITDA on the horizon, more than sufficient liquidity to reach it, and the potential overhang of the debt due in January removed, we expect the stock should continue to move higher. Churchill maintained his “Speculative Buy” rating and one-year price target of $1.80 on AcuityAds, which implied a return of 100 per cent at the time of publication.
QHR Technologies (QHR Technologies Stock Quote, Chart, News: TSXV:QHR)
In November, a record revenue quarter from QHR had Haywood analyst Pardeep Sangha feeling good about the Kelowna-based company’s future. “We believe QHR is at the end of its restructuring process,” says Sangha. “QHR has gone through substantial change over the past year including a chnage of leadership, material changes to its Board of Directors, divestment of the unprofitable RCM division, and an increased focus on profitability and the company’s core EMR business. We view the divestiture as a positive step towards sustained profitability; and focuses the Company on the EMR market in Canada, which will lead to a stronger company in FY16 and FY17. We like QHR as an investment opportunity because of the company’s high recurring revenue model, steady grwoth profile, potential for M&A activity and healthy balance sheet.”
TIO Networks (TIO Networks Stock Quote, Chart, News: TSXV:TNC)
TIO earned another fan earlier this month when Paradigm Capital analyst Kevin Krishnaratne initiated coverage of the stock with a “Buy” rating and one-year target price of $2.25. Krishnaratne estimates that the company’s planned acquisition of New Jersey-based Softgate Systems, which he expects to close in the coming months, is worth more than $0.80 a share to TIO. The analyst says M&A is a key driver for TIO and expects that another deal will surface by the middle of next year. But to those who might be led to believe the company’s growth is all about M&A, Krishnaratne points out that the more than 65 per cent gain in EBITDA forecast for fiscal 2016 is all organic, something the analyst says reflects the scalability of the company’s platform.
Disclosure: Cantech Letter Editor Nick Waddell owns shares of QHR and TIO Networks.