Echelon Wealth Partners analyst Ralph Garcea is more optimistic than the street is about Enghouse Systems’s (Enghouse Systems Stock Quote, Chart, News: TSX:ENGH) upcoming Q2 results.
On Thursday, June 8, after market close, Enghouse will report its second quarter, 2017 results. Garcea thinks the company will post earnings of $0.47 and EBITDA of $24.4-million on revenue of $83.4-million. That’s better than the street consenseus take, which is for earnings of $0.45 and EBITDA of $23.1-million on a topline of $81.6-million.
Garcea notes that there has been something missing from the mix with Enghouse so far this year.
“ENGH has an established track record of value creation through acquisitions (34 in the last 18 years) –averaging three to six deals per year over the last few years. Although we haven’t seen any deals yet from ENGH this FY, economic factors are favourable for acquisitions, especially for small cap companies. ENGH targets companies in the $5-50M revenue range preferably with: (1) strong recurring revenue; (2) geographic, product or scale expansion; (3) mission critical solutions; and (4) high barriers to entry. The objective is for a cash payback within five to six years.”
In a research update to clients today, Garcea maintained his “Buy” rating and one-year price target of $65.00 on Enghouse Systems, implying a return of four per cent at the time of publication.
Garcea thinks Enghouse will post EBITDA of $102-million on revenue of $348-million in fiscal 2017. He expects those numbers will improve to EBITDA of $113-million on a topline of $379-million the following year.