VersaPay (VersaPay Stock Quote, Chart, News: TSXV:VPY) is a company with great management, high barriers to entry, and a large addressable market, says Global Maxfin Capital analyst Manish Grigo.
In a research report to clients today, Grigo initiated coverage of VersaPay with a “Buy” rating and a one-year price target of $1.75, implying a return of 52.2 per cent at the time of publication.
Grigo says he expects VersaPay’s e-voice and payments make is set to grow in a space he estimates to be worth $5-billion in recurring revenue, annually. He thinks the company’s POS business, which has generated more than $2-million in free cash flow in the past four quarters, is stable and can continue to fund its electronic invoice presentation and payment (EIPP) opportunity.
“We believe VersaPay’s end-to-end platform, which includes integration with accounting systems, email invoice presentment, a white – labelled web portal, and robust payment engine for processing eChecks and credit card payments, gives it a big advantage over its competitors that are focused either on invoicing or payment processing,” says Grigo.
The analyst says VersaPay’s solution is a particularly sticky one.
“VPY’s solutions, once installed, become an integral part of a financial institution’s infrastructure; as such, these solutions reduce the threat of customer loss,” says Grigo. “Each sale involves a lengthy cycle of testing and implementation, which makes it unlikely for current customers to reach out to newer firms, thus it acts as a potential deterrent for others competing within the same market. Each customer win is sticky as clients are unlikely to dislodge a current vendor if things are running smoothly and trying another supplier would mean more trials and evaluations. In the B2B segment, enterprises are happy to keep status quo.”
Founded in 2006, Toronto-based VersaPay is a company focused on the presentment and payment of electronic invoices. The company went public in 2010, and in September 2013 industry veteran Craig O’Neill replaced Bill McGill as CEO.
Grigo believes VersaPay will grow its topline to $5.4-million in fiscal 2015, $6.3-million in fiscal 2016 and then to $9.5-million the following year.
Disclosure: VersaPay is an annual sponsor of Cantech Letter.