With the first quarter of 2017 now firmly in the books, Echelon Wealth Partners analyst Ralph Garcea says Pivot Technology Solutions (TSX:PTG) is one of his top small cap picks for 2017.
In a research update to clients today, Garcea conferred “Top Pick” status on Pivot Technology. Garcea has a “Buy” rating and a one-year price target of $5.50 on the stock, which implied a return of 214 per cent at the time of publication.
The analyst today reiterated his investment thesis on Pivot.
“With $1.5B in revenue and $31M in EBITDA (2.0% margins) expected in 2017 and the possibility of upside surprises, the Company is well-positioned to capitalize on growth in IT spending – with ~70% of revenue from Fortune 100 enterprises,” said Garcea. “In a very dynamic IT landscape, Pivot has managed to build a strong brand through successful differentiation, based on: (1) its MVSP business model; (2) a strong focus on deep customer relationships; (3) having embedded pre-sales engineers; (4) consistent delivery of quality; (5) operational and organizational reliability; and (6) innovation. PTG is well-positioned to pursue sustainable growth of profitability through leveraging its growing brand awareness, realizing integration synergies, expanding its product and service offerings, and pursuing growth in Canada. The recent acquisition of TeraMach provides the initial footprint to grow/acquire in Canada. With a payout ratio of ~25%, cash flows and dividend support are not an issue.”
Garcea thinks Pivot Technology will generate Adjusted EBITDA of $31-million on revenue of $1.52-billion in fiscal 2017. He expects these numbers will improve to EBITDA of $45-million on a topline of $1.6-billion the following year.