DH Corporation is undervalued, says Industrial Alliance

Ahead of the company’s second quarter earnings, Industrial Alliance analyst Dylan Steuart is feeling good about DH Corporation (DH Corporation Stock Quote, Chart, News: TSX:DH), even though he thinks the quarter will come in on the soft side.

On Tuesday after market, DH Corp will report its Q2, 2016 results. In the first quarter, the company posted adjusted net income of $45.4-million on revenue of $412.1-million, a 39.7 per cent topline increase over the same period a year prior.

Steuart says he expects DH will post adjusted net income of $49.6-million on revenue of $417.1-million in the second quarter, just below the street consensus of $421.4-million. The analyst says this likely won’t be a quarter that will surprise to the upside.

“Overall expectations are for a soft Q2/16 given the currency headwinds and another quarter of lower-than-usual renewal flows from the LaserPro product similar to what was witnessed last quarter,” says Steuart. “However, strong cash flow generation and signs of continued strong organic growth within Fundtech and Core Banking should help to offset a weak bottom line result.”

Longer term, Steuart believes the company is undervalued. In a research update to clients today, he maintained his “Strong Buy” rating and one-year price target of $46.00 on DH Corp., implying a return of 39.4 per cent at the time of publication, including dividend.