Solium Capital gets price target cut at Haywood

A weaker than expected quarter has Haywood analyst Pardeep Sangha cutting his price target on Solium Capital (Solium Capital Stock Quote, Chart, News: TSX:SUM).

Yesterday, Solium Capital reported its Q1, 2016 results. The company earned $1.84-million on revenue of $25.4-million, a three per cent increase over 2015’s topline, but the bottom line was down 57 per cent.

Sangha says Solium’s results fell below his and the consensus estimates on both the top and bottom line and sent him back to the drawing board to revise his estimates for fiscal 2016 and fiscal 2017. He now expects the company will post EBITDA of $17.8-million on revenue of $101.5-million in 2016 and EBITDA of $27.6-million on revenue of $114.7-million in 2017.

The analyst today maintained his “Buy” rating on Solium Capital, but cut his one-year price target from $10.00 to $9.00, implying a return if 29.3 per cent at the time of publication. He says he is concerned with the lower growth rates the company is currently experiencing and suggests that M&A may be a panacea.

“We believe a more aggressive acquisition strategy coupled with organic growth and improved profitability next year could result in significant appreciation in Solium’s share price,” says Sangha. With $71-million in cash on its balance sheet and strong profitability, we believe shareholders, along with an aligned management team, stand to benefit from an aggressive acquisition strategy in order to drive future growth.”

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