It’s up 20 per cent since he launched coverage on April 20th, but Mackie Research Capital analyst Nikhil Thadani thinks there is still upside in Mogo Finance Technology (TSX:MOGO).
On Monday, May 8, Mogo will report its Q1 2017 results. Thadani thinks the company will post Adjusted EBITDA of negative $400,000 on revenue of $11.5-million.
The analyst who initiated coverage of Mogo with a “Speculative Buy” rating and one-year price target of $6.00, today maintained that rating and target, which currently implies a return of 43 per cent. Thadani says despite a strong recent run, Mogo is still cheap compared to its peers.
“Since launching coverage, Mogo’s valuation on a 2018 net sales basis, has increased ~0.3x, in-line with FinTech providers,” he notes. “We value Mogo on an EV/Sales basis, with a few adjustments in order to give Mogo credit for expected organic loan book growth. We exclude funding debt (i.e. credit facilities to fund loan book) from net debt and correspondingly account for loan book interest revenue net of funding interest expenses. With these adjustments, on a 2018 basis, Mogo now trades at ~2.4x net sales (~2.1x when we launched) vs. peers at an average ~3.7x (was ~3.4x when we launched). Our $6/sh target implies 3x net 2018 sales, below peers, with upside if Mogo can successfully ramp fee based revenue sooner than expected. Our $6/sh target is at the mid-point of the ~$5-7/sh range suggested by our DCF analysis, based on assumptions for long term growth and margin profile in-line with peers.”
Thadani thinks Mogo will post EBITDa of $691.000 on revenue of $49.1-million in fiscal 2017. He thinks these numbers will improve to EBITDA of $8.34-million on a topline of $69.1-million the following year.